Fitting and interpreting Cragg's tobit alternative using Stata

In this article, I introduce the user-written command craggit, which simultaneously fits both tiers of Cragg’s (1971, Econometrica 39: 829–844) “twotier” (sometimes called “two-stage” or “double-hurdle”) alternative to tobit for corner-solution models. A key limitation to the tobit model is that the probability of a positive value and the actual value, given that it is positive, are determined by the same underlying process (i.e., the same parameters). Cragg proposed a more flexible alternative that allows these outcomes to be determined by separate processes through the incorporation of a probit model in the first tier and a truncated normal model in the second. Also, tobit is nested in craggit, making the latter a popular choice among “two-tier” models. In the article, I also present postestimation syntax to facilitate the understanding and interpretation of results.


Issue Date:
2009
Publication Type:
Journal Article
DOI and Other Identifiers:
st0179 (Other)
PURL Identifier:
http://purl.umn.edu/143014
Published in:
Stata Journal, Volume 09, Number 4
Page range:
584-592
Total Pages:
9

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 Record created 2017-04-01, last modified 2017-08-26

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