Specification Errors in Limited Dependent Variable Models

9 Pages Posted: 4 Jul 2004 Last revised: 14 Apr 2010

See all articles by G.S. Maddala

G.S. Maddala

Ohio State University (Deceased)

Forrest D. Nelson

University of Iowa - Henry B. Tippie College of Business - Department of Economics

Date Written: July 1975

Abstract

A preliminary investigation of two specification error problems in truncated dependent variable models is reported. It is shown that heteroscedasticity in a tobit model results in biased estimates when the model is misspecified. This differs from the OLS model where estimates are still consistent though inefficient. The second problem examined is aggregation. An appropriate nonlinear least squares regression model is derived for situations when the micro-level model fits a tobit framework but only aggregate data are available.

Suggested Citation

Maddala, G.S. and Nelson, Forrest D., Specification Errors in Limited Dependent Variable Models (July 1975). NBER Working Paper No. w0096, Available at SSRN: https://ssrn.com/abstract=237144

G.S. Maddala

Ohio State University (Deceased)

N/A

Forrest D. Nelson (Contact Author)

University of Iowa - Henry B. Tippie College of Business - Department of Economics ( email )

108 Pappajohn Building
Iowa City, IA 52242
United States
(319) 335-0854 (Phone)

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