[Limdep Nlogit List] zero expenditures - Grouped data regression model

[Steven Vos]

Dear Mr. Green,
Thank you for your response to my question.
If I understand it right the second model would exclude the subsample op people with zero-expenditures.
You suggest to scale up the probabilities in my grouped data model by the probability that y>0.
However, I'm not sure how to relate the first model to the second model (probabilities)?

Many thanks,

Kind regards,
Steven Vos

-----Original Message-----
From: limdep-bounces at limdep.itls.usyd.edu.au [mailto:limdep-bounces at limdep.itls.usyd.edu.au] On Behalf Of William Greene
Sent: maandag 14 juni 2010 12:35
To: Limdep and Nlogit Mailing List
Subject: Re: [Limdep Nlogit List] zero expenditures - Grouped data regression model

Steven.
The suggestion was that the zero values be treated as one of two
decisions in a hurdle (two part) model. Your equations would be
D = 0 if y = 0 <---- possibly a probit model
D = 1 if y > 0
Then a model for y|y>0, such as a truncated regression in the 
continuous case.  For your grouped data, with the discrete outcome,
probabilities for your GROUPED model are scaled up by the 
probability that y > 0.
/Bill Greene

----- Original Message -----
From: "Steven Vos" <Steven.Vos at faber.kuleuven.be>
To: limdep at limdep.itls.usyd.edu.au
Sent: Monday, June 14, 2010 4:31:25 AM GMT -05:00 Colombia
Subject: [Limdep Nlogit List] zero expenditures - Grouped data regression model

Dear Limdep user,





I've got another question concerning grouped data regression models (@Andreas: Thank you for your reaction to my previous question):



My dependent variable are expenditures (0€, < 100€, 100-200€, 200-400€, >400 €).

In a first model model I've collapsed the two first categories. So the first category (< 100€) included zero-expenditures.

However I've got the remark that these zero-expenditures should be a category on its own.

So my idea is to use
  y=1  if y* < 0.1 €
  y= 2  if 0.1€ ≤y* < 100 €
  y= 3  if 100€ ≤y* < 200 €
  y= 4  if 200€ ≤y* < 400 €
  y= 5  if 400€ ≤y*


In my opinion it seems reasonable to assume that the latent variable y* can take negative values.



Is this straight forward, or are there better solutions to threat the zero-expenditures as a category on its own?



Many thanks,



Steven Vos

K.U.Leuven

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