DETECTING SOCIAL INTERACTIONS IN BIVARI- ATE PROBIT MODELS WITH AN ENDOGENOUS DUMMY VARIABLE: SOME SIMULATION RESULTS

• This paper analyzes the possibility of detecting observable and non-observable social interactions in a bivariate probit model with an endogenous dummy regressor via Monte Carlo simulation. In small samples, we find severe size distortions of the Wald test and only a low probability of detecting observable and non-observable social interactions. In large samples, however, we find this test to be very powerful. Key-Words: • parameter tests; bivariate probit model; Monte Carlo study