a1 Hong Kong University of Science and Technology
a2 University of Southern California, Nanyang Technological University and City University of Hong Kong
a3 University of Manitoba
We consider censored structural latent variables models where some exogenous variables are subject to additive measurement errors. We demonstrate that overidentification conditions can be exploited to provide natural instruments for the variables measured with errors, and we propose a two-stage estimation procedure. The first stage involves substituting available instruments in lieu of the variables that are measured with errors and estimating the resulting reduced form parameters using consistent censored regression methods. The second stage obtains structural form parameters using the conventional linear simultaneous equations model estimators.
We are deeply appreciative of the very helpful comments of a co-editor and two referees. We also thank T. Amemiya for helpful comments. This research is partially supported by the Natural Sciences and Engineering Research Council of Canada (NSERC). Part of this work was carried out while the first author was at the National University of Singapore.