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Re: st: mlogit and mfx -- statistical significance

From   Maarten buis <>
Subject   Re: st: mlogit and mfx -- statistical significance
Date   Tue, 25 Mar 2008 11:26:27 +0000 (GMT)

The reason for such a difference is that there is a subtle difference
in what these two measures measure: The output from -mlogit- gives you
a test whether the odds ratio (*) is significantly different from 1,
while -mfx- gives you a change in probabilities. 

Say the odds ratio is 10, but the baseline odds is .0001 success for
every failure, so we are talking about comparing a odds of .0001 with
an odds of .001, which corresponds to a probabilities .00009999 and
.000999, leading to a risk difference (result of -mfx-) of .00089901 .

So a big sounding odds ratio of 10 can easily correspond to a very
small sounding risk difference of .0009 . The reason is that by
computing the ratio of odds, the baseline odds drops out, so whith odds
ratios you only look groups are different but leave out the fact that
those differences hardly matter if probability of success is very high
or very low for everybody. 

Hope this helps,

(*) Some disciplines don't call the parameters of -mlogit- log odds
ratios, but they are the log of a ratio of odds, so I think the other
disciplines are correct in refering to them as log odds ratios, for
more on this see:

Ps. has anybody noticed that I have refrained from repeating my
favourite feature request?

--- David Zetland <> wrote:

> Can anyone explain why some RHS vars are significant in <mlogit> but
> not in <mfx> (and vice versa)?
> I have several RHS dummies, but the problem also shows up with
> <margeff>
> Should I care? What can be done about it? How do I interpret results?
> I have searched the FAQs and forums and seen similar questions but no
> answers
> -- 
> The measure of a man is what he does with power. -- Plato
> David Zetland ( 530-848-9208
> PhD Candidate, Agricultural & Resource Economics, UC Davis
> *
> *   For searches and help try:
> *
> *
> *

Maarten L. Buis
Department of Social Research Methodology
Vrije Universiteit Amsterdam
Boelelaan 1081
1081 HV Amsterdam
The Netherlands

visiting address:
Buitenveldertselaan 3 (Metropolitan), room Z434

+31 20 5986715

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