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RE: st: stata code for two-part model

From   Maarten buis <>
Subject   RE: st: stata code for two-part model
Date   Mon, 18 Aug 2008 17:14:10 +0100 (BST)

--- "Lachenbruch, Peter" <> wrote:
> The use of a continuous model for data in which there is a clump of
> zeros seems incorrect.  There is no transformation that can remove
> this clump.  The severity of the problem depends a bit on the size
> of the clump.  In the hospital insurance data (wanting to estimate
> hospitalization costs in the policy holders) 95% of the population
> had no costs.  Pretending that these were continuous would lead to
> some nonsense results.  At the present time, I have a data set that
> has 32 out of 145 people with zeros.  However, these are not
> necessarily identifiable since they could be slightly greater than
> zero.  I'm gritting my teeth on this and pretending all is well. 
> However, a histogram shows enormous skewness.  I'll probably try a
> square root.

An alternative that might be useful would be to use 
-zip varlist, inflate(_cons) vce(robust)- which is useful even you
don't have integer values on your dependend variable. Problem ofcourse
is that the reasoning behind these quasi maximum likelihood models is
asymptotic, and a samplesize of 145 with such a relatively complicated
model may not be large enough to reach the Wonderful Kingdom of

Hope this helps,

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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