OLS and Tobit Estimates: When is Substitution Defensible Operationally?

Clevo Wilson () and Clement Tisdell

No 90519, Economic Theory, Applications and Issues Working Papers from University of Queensland, School of Economics

Abstract: Field data are used to illustrate that, other things constant, regression results using Ordinary Least Squares (OLS) converge to Tobit estimates as the number of zeros in the regressand decrease. Tobit estimates are theoretically superior to OLS estimates when using censored data. However, if little difference exists between OLS and Tobit estimates, OLS may be operationally acceptable. OLS may even be optimal in a bounded rationality sense because the extra cost of using Tobit analysis may be less than the extra benefits from a very slight increase in accuracy.

Keywords: Public; Economics (search for similar items in EconPapers)
Pages: 9
Date: 2002-05
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:uqseet:90519

DOI: 10.22004/ag.econ.90519

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