What is a linear probability model?
Understand the Problem
The question is asking for an explanation of what a linear probability model is, which is typically used in statistics and econometrics to model binary outcomes based on a linear approach.
Answer
The application of ordinary least squares (OLS) to binary outcomes.
The final answer is the application of ordinary least squares (OLS) to binary outcomes instead of continuous outcomes.
Answer for screen readers
The final answer is the application of ordinary least squares (OLS) to binary outcomes instead of continuous outcomes.
More Information
The LPM is commonly used in economics and social sciences to analyze binary outcomes. It is simpler than logistic regression but can have limitations, such as producing predicted probabilities outside the [0, 1] range.
Tips
A common mistake is using LPM when predicted probabilities outside [0, 1] are problematic, in which case logistic or probit models are preferred.
Sources
- The Linear Probability Model (LPM) - Office of Population Affairs - opa.hhs.gov
- Linear probability model - Wikipedia - en.wikipedia.org
- Linear Probability Model - James Murray - murraylax.org
