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From |
Austin Nichols <austinnichols@gmail.com> |

To |
statalist@hsphsun2.harvard.edu |

Subject |
Re: st: Reconcile Log Transformed with Untransformed Results |

Date |
Sat, 13 Feb 2010 08:03:26 -0500 |

Erasmo Giambona <e.giambona@gmail.com>: No, not correct: a regression of ln(y+1) on ln(x+1) does not estimate an elasticity, and a change from -0.45 to +0.4 does not correspond to any well-defined percentage point change. If you are unsure of the correct functional form, consider -lpoly- or -fracpoly- or -mkspline- or -pspline- (on SSC). On Sat, Feb 13, 2010 at 7:10 AM, Erasmo Giambona <e.giambona@gmail.com> wrote: > Dear All, > > I am estimating the following model using simple OLS: Y=a+bX+e. The b > coefficient is equal to 0.006. The 25th percentile of X=-0.45 and the > 75th percentile of X=0.40. The mean of Y is equal to 0.026. I use this > information to gauge a sense of the economic effect of X on Y. I find > that a 1 interquartile range (IQR) change in X =(0.40+0.45) has an > effect on Y equal to 0.006*0.85=0.0051, which is a 20% change in Y > (obtained as 0.0051/0.026) and seems quite sizable. > > Next, I re-estimate the same model, but first I log transform both RHS > and LHS as follows: LNY=ln(1+Y) and LNX=ln(1+X). Therefore, I estimate > the following model: LNY=A+B*LNX+E. The B coefficient is equal to > 0.008 in this case. It seems the interpretation of this coefficient is > the following: a 1% change in X casuses a 0.008% increase in Y. > Alternatively, if I consider a 189% change in X (i.e., the percentage > increase from the 25th to the 75 percentile) I find that this causes a > 1.51% increase in Y (obtained as 189*0.008). > > My question is: is this calculation correct? I find it hard to > reconcile it with the untransformed results, where a 1 IQR change in X > causes Y to increase by 20%. > > Thanks for any suggestions on the issue, > > Erasmo * * For searches and help try: * http://www.stata.com/help.cgi?search * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

**Follow-Ups**:**Re: st: Reconcile Log Transformed with Untransformed Results***From:*Erasmo Giambona <e.giambona@gmail.com>

**References**:**st: Reconcile Log Transformed with Untransformed Results***From:*Erasmo Giambona <e.giambona@gmail.com>

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