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

[Steven Vos]

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