Novel Approaches to Coherency Conditions in LDV Models

The paper discusses the major identi…fication issue of coherency conditions in LDVmodels with endogeneity and flexible temporal and contemporaneous correlations inthe unobservables. Conditions for coherency as discussed in the existing literatureare reviewed and shown to be rather esoteric. Two novel methods for establishingcoherency conditions are presented, which have intuitive interpretations and are easyto implement and generalize. The constructive consequence of the new approachesis that they indicate how to achieve coherency in models traditionally classi…fied asincoherent through the use of prior sign restrictions on model parameters. This allowsus to develop estimation strategies based on Conditional MLE for simultaneous LDVmodels without imposing recursivity. Econometric applications are used to illustratethe methods in practice and extensions are given to simultaneous ordered probitmodels with multiple regions.[...]