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Dealing with the log of zero in regression models

Author

Listed:
  • Christophe BELLEGO

    (CREST; ENSAE.)

  • Louis-Daniel PAPE

    (CREST; Ecole Polytechnique.)

Abstract

Log-linear and log-log regressions are one of the most used statistical model. However, handling zeros in the dependent and independent variable has remained obscure despite the prevalence of the situation. In this paper, we discuss how to deal with this issue. We show that using Pseudo-Poisson Maximum Likelihood (PPML) is a good practice compared to other approximate solutions. We then introduce a new complementary solution to deal with zeros consisting in adding a positive value specific to each observation that avoids some numerical issues faced by the former.

Suggested Citation

  • Christophe BELLEGO & Louis-Daniel PAPE, 2019. "Dealing with the log of zero in regression models," Working Papers 2019-13, Center for Research in Economics and Statistics.
    • Handle: RePEc:crs:wpaper:2019-13
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    References listed on IDEAS

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    Cited by:

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    More about this item

    Keywords

    Log(0); Log of zero; Log-log; Bias; Elasticity; PPML;
    All these keywords.

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