Probit Model


Health Economics

  • A generalized linear statistical model with binary dependent variables based on the cumulative normal distribution. Its use is generally associated with the maximum likelihood estimation procedure instead of ordinary least squares estimation. The idea is to posit an underlying continuous latent variable, such that, given binary date, whether the score is 0 or 1 depends upon a critical value of the latent variable. Thus, if the binary variable is sick/well, the critical threshold might be a stipulated value of a quality-adjusted life-year. The latent variable (QALYs) is then posited to be a linear function of other variables including unobservable ones and the error term is assumed to be normally distributed. Introduced in Bliss (1935).