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Econometric Modelling of Social Bads

William Greene (), Mark Harris (), Preety Pratima Srivastava () and Xueyan Zhao ()

No WP1305, Bankwest Curtin Economics Centre Working Paper series from Bankwest Curtin Economics Centre (BCEC), Curtin Business School

Abstract: When modelling 'social bads', such as illegal drug consumption, researchers are often faced with a dependent variable characterised by an excessive?amount of zero bservations. Building on the recent literature on hurdle and double-hurdle models, we propose a double-inflated modelling framework, where the zero observations are allowed to come from: non-participants; participant misreporters (who have larger loss functions associated with a truthful response); and infrequent consumers. Due to our empirical application, the model is derived for the case of an ordered discrete dependent variable. However, it is similarly possible to augment other such zero-inflated models (zero-inflated count models, and double-hurdle models for continuous variables, for example). The model is then applied to a consumer choice problem of cannabis consumption. As expected we find that misreporting has a significant (estimated) effect on the recorded incidence of marijuana. Specifically, we find that 14% of the zeros reported in the survey is estimated to come from individuals who have misreported their participation.

Keywords: Ordered outcomes; discrete data; cannabis consumption; zero-inflated responses (search for similar items in EconPapers)
JEL-codes: C3 D1 I1 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dcm and nep-ecm
Date: 2013-07
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