Structural Threshold Regression

This paper extends the simple threshold regression framework of Hansen (2000) and Caner and Hansen (2004) to allow for endogeneity of the threshold variable. We develop a concentrated least squares estimator of the threshold parameter based on an inverse Mills ratio bias correction. We show that our estimator is consistent and investigate its performance using a Monte Carlo simulation that indicates the applicability of the method in …nite samples Classification-JEL: C13, C51