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Re: st: logY, Tobit and the prediction of Y


From   n j cox <n.j.cox@durham.ac.uk>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: logY, Tobit and the prediction of Y
Date   Wed, 23 Apr 2003 14:35:34 +0100

Christer.Thrane@hil.no wrote:

To my question below, Mathew Stalker replied:

The prediction of Y from your model would simply be the exponential of the
predicted logY.

---

My reply: Well, according to Wooldridge, in his book Basic Econometrics
(2000:202), this does not work, since the value of Y will be systematically
underestimated by simply taking the exponential of logY.
See my earlier posting for one alternative.

However, you should note that the log of zero is minus infinity, so in your
log model no observations where Y is zero will be included.  Is this really
what you want?

---

My reply: I solved this by setting 0 expenditures to 1 befor the log
transformatiom (as I wrote in the mail).
There are different questions here. Mathew's query is
about

exp(predicted(log Y))

and he is saying this can never be 0, and he is right,
but as he signals it is for you to decide whether this
worries you. Your answer is about

log(observed(max(1,Y)))

which you are saying is always determinate, and you
are right, but this is not the same issue, I believe.

Nick
n.j.cox@durham.ac.uk

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