Exact computation of Censored Least Absolute Deviations estimator

Yannis Bilias, Kostas Florios () and Spyros Skouras

Journal of Econometrics, 2019, vol. 212, issue 2, 584-606

Abstract: We show that exact computation of the censored least absolute deviations (CLAD) estimator proposed by Powell (1984) may be achieved by formulating the estimator as a linear Mixed Integer Programming (MIP) problem with disjunctive constraints. We apply our approach to three previously studied datasets and find that widely used approximate optimization algorithms can lead to erroneous conclusions. Extensive simulations confirm that MIP-based computation using available solvers is effective for datasets typically encountered in econometric applications and that, despite the proliferation of competitors, CLAD remains a useful estimator.

Keywords: CLAD estimator; Censored regression models; Mixed Integer Programming; Disjunctive constraints (search for similar items in EconPapers)
JEL-codes: C13 C14 C24 C44 C61 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:212:y:2019:i:2:p:584-606

DOI: 10.1016/j.jeconom.2019.05.016

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