Comparison Between Nelson-Olson Method and Two-Stage Limited Dependent Variables (2SLDV ) Method for the Estimation of a Simultaneous Equations System (Tobit Model)

Abstract

This study relates to the estimation of a simultaneous equations system for the Tobit model where the dependent variables ( ) are limited, and this will affect the method to choose the good estimator. So, we will use new estimations methods different from the classical methods, which if used in such a case, will produce biased and inconsistent estimators which is (Nelson-Olson) method and Two- Stage limited dependent variables(2SLDV) method to get of estimators that hold characteristics the good estimator .
 That is , parameters will be estimated for the limited variables and find the variance-covariance matrix for extracted estimators by the aforementioned two methods and then compare between the results of the two methods and find any better method by estimation and then finding the estimation efficiency, and this is what the study aims to .
 A simultaneous equations system will be imposed for the limited model defined by two equations containing two endogenous variables one of complete observations and the other censored at zero. 
 The two methods were used to analyze the relationship between income and family expenditure on durable consumer goods , where the results showed that the performance of (Nelson-Olson) method is better than performing the Two-Stage limited dependent variables (2SLDV) method in obtain the lower values and all comparison measures as well as the results showed that income and expenditure one affects the other and the 
 and the price affects the income and expenditure