Tobit or Not Tobit?

27 Pages Posted: 1 Dec 2009

See all articles by Jay Stewart

Jay Stewart

Bureau of Labor Statistics; IZA Institute of Labor Economics

Abstract

Time-use surveys collect very detailed information about individuals' activities over a short period of time, typically one day. As a result, a large fraction of observations have values of zero for the time spent in many activities, even for individuals who do the activity on a regular basis. For example, it is safe to assume that all parents do at least some childcare, but a relatively large fraction report no time spent in childcare on their diary day. Because of the large number of zeros Tobit would seem to be the natural approach. However, it is important to recognize that the zeros in time-use data arise from a mismatch between the reference period of the data (the diary day) and the period of interest, which is typically much longer. Thus it is not clear that Tobit is appropriate. In this study, I examine the bias associated with alternative estimation procedures for estimating the marginal effects of covariates on time use. I begin by adapting the infrequency of purchase model, which is typically used to analyze expenditures, to time-diary data and showing that OLS estimates are unbiased. Next, using simulated data, I examine the bias associated with three procedures that are commonly used to analyze time-diary data ヨ Tobit, the Cragg (1971) two-part model, and OLS ヨ under a number of alternative assumptions about the data-generating process. I find that the estimated marginal effects from Tobits are biased and that the extent of the bias varies with the fraction of zero-value observations. The two-part model performs significantly better, but generates biased estimated in certain circumstances. Only OLS generates unbiased estimates in all of the simulations considered here.

Keywords: Tobit, time use

JEL Classification: C24, J22

Suggested Citation

Stewart, Jay, Tobit or Not Tobit?. IZA Discussion Paper No. 4588. Available at SSRN: https://ssrn.com/abstract=1515135

Jay Stewart (Contact Author)

Bureau of Labor Statistics ( email )

2 Massachusetts Avenue, NE
Washington, DC 20212
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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