Tobit

LAB 7
TOBIT, CENSORED,
TRUNCATED, AND SAMPLE
SELECTION REGRESSIONS
Teaching Assistant Microeconometrics

Examples:
- A central bank intervenes to stop an exchange rate

falling below or going above certain levels.
- Dividends paid by a company may remain zero until
earnings reach some threshold value.
- A government imposes price controls on some goods.
- A survey of only working women, ignoring non-working
women.
1. Tobit and Censored
The tobit model, also called a censored regression model, is

designed to estimate linear relationships between variables when
there is either left- or right-censoring in the dependent variable
(also known as censoring from below and above, respectively).
An example that illustrates the

situation is based on Thomas
Mroz’s (1987) study of married
women’s labor force participation
and wages. The data are in the file
mroz.dat and consist of 753
observations on married women. Of
these 325 did not work outside the
home, and thus had no hours
worked and no reported wages.
With OLS Estimate
Educ?
Is not Consistent.
Tobit Regression
How to Interpret?
* marginal effect on E(y|x)
margins, dydx(educ) at(educ=12.29 exper=10.63 age=42.5 kidsl6=1) predict(ystar(0,.))
* marginal effect on E(y|x,y>0)

margins, dydx(educ) at(educ=12.29 exper=10.63 age=42.5 kidsl6=1) predict(e(0,.))
we estimate that another year of education will increase a wife’s hours
of work by about 26 hours, conditional upon the assumed values of
the explanatory variables.
we estimate that another year of education will increase a wife’s hours

of work by about 21 hours, conditional upon the assumed values of
the explanatory variables.
2. Truncated
Truncated regression is used to model dependent variables for

which some of the observations are not included in the analysis
because of the value of the dependent variable.
Sometimes it is possible that we do not observe the limit values; in
such a case the sample is said to be truncated. In this case Tobit
does not apply; however, there is a similar maximum likelihood
procedure, called truncated regression, for such a case.
Example
IHSG on Environmental rating
2. Truncated-Example 1
A researcher has data for a sample of Americans whose income is above the
poverty line. Hence, the lower part of the distribution of income is
truncated. If the researcher had a sample of Americans whose income was at
or below the poverty line, then the upper part of the income distribution would
be truncated. In other words, truncation is a result of sampling only part of
the distribution of the outcome variable
2. Truncated- Example 2
For example, modeling college GPA as a function of high school GPA

(HSGPA) and SAT scores involves a sample that is truncated based on the
predictors, i.e., only students with higher HSGPA and SAT scores are
admitted into the college.
2. Truncated- Histogram
Note:
3. Sample Selection Model Vardep : lwage
Varindep : educ, exper
(Censored data is available)
Heckit Example (mroz.dta) :

Analysis of wages earned by married women using the Mroz (1987)
data, In the sample of 753 married women, 428 have market
employment and nonzero earnings.
If we wish to study the determinants of the wages of married

women, we face a sample selection problem.
3. Sample Selection Model
This simple procedure uses two estimation steps

Step 1.
Regress using probit
Step 2.
Predict post-estimation command, and then
generating a new variable for the Inverse Mills ratio.
Step 3.
Regressions the model add “IMR”
Step 1
Step 2
Step 3
The Inverse Mills Ratio
statistically significant,
implying that there is a
selection bias present
in the least squares
results.
Heckman Two Step
Koefisien sama
namun
mengkoreksi SE
DAFTAR PUSTAKA
1. http://www.bauer.uh.edu/rsusmel/phd/ec1-23.pdf
2. http://www.ats.ucla.edu/stat/stata/dae/tobit.htm
3. Lee C. Adkins and R. Carter Hill. “Using Stata for Principles of
Econometrics 4th Edition”. John Wiley and Sons, Inc(2011).
4. http://www.ats.ucla.edu/stat/stata/dae/truncreg.htm

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LAB 7

Teaching Assistant Microeconometrics

- A central bank intervenes to stop an exchange rate

The tobit model, also called a censored regression model, is

An example that illustrates the

* marginal effect on E(y|x,y>0)

we estimate that another year of education will increase a wife’s hours

Truncated regression is used to model dependent variables for

For example, modeling college GPA as a function of high school GPA

Heckit Example (mroz.dta) :

If we wish to study the determinants of the wages of married

This simple procedure uses two estimation steps

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