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ESTIMATION WITH CENSORED REGRESSORS: BASIC ISSUES *
Author(s) -
Rigobon Roberto,
Stoker Thomas M.
Publication year - 2007
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/j.1468-2354.2007.00470.x
Subject(s) - censoring (clinical trials) , econometrics , estimation , parametric statistics , statistics , censored regression model , maximum likelihood , parametric model , computer science , mathematics , economics , regression analysis , management
We study issues that arise for estimation of a linear model when a regressor is censored. We discuss the efficiency losses from dropping censored observations, and illustrate the losses for bound censoring. We show that the common practice of introducing a dummy variable to “correct for” censoring does not correct bias or improve estimation. We show how censored observations generally have zero semiparametric information, and we discuss implications for estimation. We derive the likelihood function for a parametric model of mixed bound‐independent censoring, and apply that model to the estimation of wealth effects on consumption.