Estimation, Specification and Testing in Middle- and Zero-Inflated Ordered Probit Models

42 Pages Posted: 13 Feb 2018

See all articles by Sarah Brown

Sarah Brown

University of Sheffield - Department of Economics; IZA Institute of Labor Economics

Mark N. Harris

Curtin University

Christopher Spencer

Loughborough University

Date Written: February 7, 2018

Abstract

Zero-inflated ordered probit (ZIOP) and middle-inflated ordered probit (MIOP) models are finding increasing favour in the discrete choice literature. Both models consist of a mixture of binary and single ordered probit equations, the combination of which accounts for an "excessive" build-up of observations in a given choice category. We propose generalisations to these models - which collapse to their ZIOP/MIOP counterparts under a set of simple parameter restrictions - with respect to the inflation process. The appropriateness and implications of our generalisations are demonstrated by using two key empirical applications from the economics and political science literatures. Likelihood ratio (LR) and Lagrange multiplier (LM) specification tests lead us to support the newly proposed generalised models over the ZIOP/MIOP ones, and suggest a role for our generalisations in modelling zero- and middle-inflation processes.

Keywords: Discrete data, Lagrange multiplier test, middle-inflated ordered probit, zero-inflated ordered probit.

JEL Classification: C12, C35

Suggested Citation

Brown, Sarah and Harris, Mark N. and Spencer, Christopher, Estimation, Specification and Testing in Middle- and Zero-Inflated Ordered Probit Models (February 7, 2018). Available at SSRN: https://ssrn.com/abstract=3119673 or http://dx.doi.org/10.2139/ssrn.3119673

Sarah Brown

University of Sheffield - Department of Economics

9 Mappin Street
Sheffield, S1 4DT
United Kingdom

IZA Institute of Labor Economics

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

Mark N. Harris

Curtin University ( email )

Kent Street
Bentley
Perth, WA WA 6102
Australia

HOME PAGE: http://business.curtin.edu.au/contact/staff_directory/?profile=Mark-Harris

Christopher Spencer (Contact Author)

Loughborough University ( email )

Ashby Road
Nottingham NG1 4BU
Great Britain

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