We study the impact of weak identification in discrete choice models, and provide insights into the determinants of identification strength in these models. Using these insights, we propose a novel test that can consistently detect weak identification in many commonly applied discrete choice models, such as probit, logit, and many of their extensions. Furthermore, we demonstrate that if the null hypothesis that identification is weak can be rejected, Wald-based inference can be carried out using standard formulas and critical values. A Monte Carlo analysis compares our proposed testing approach against commonly applied weak identification tests. The results simultaneously demonstrate the good performance of our approach and the fundamental failure of conventionally applied, i.e., linear, weak identification tests in this context. We compare our testing approach to those commonly applied in the literature within two empirical examples: married women labor force participation, and US food aid and civil conflicts.
We study the impact of weak identification in discrete choice models, and provide insights into the determinants of identification strength in these models. Using these insights, we propose a novel test that can consistently detect weak identification in commonly applied discrete choice models, such as probit, logit, and many of their extensions. Furthermore, we demonstrate that when the null hypothesis of weak identification is rejected, Wald-based inference can be carried out using standard formulas and critical values. A Monte Carlo study compares our proposed testing approach against commonly applied weak identification tests. The results simultaneously demonstrate the good performance of our approach and the fundamental failure of using conventional weak identification tests for linear models in the discrete choice model context. Furthermore, we compare our approach against those commonly applied in the literature in two empirical examples: married women labor force participation, and US food aid and civil conflicts.
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