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Econometric Methods for Fractional Response Variables with an Application to 401(k) Plan Participation Rates

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  • Leslie E. Papke
  • Jeffrey M. Wooldridge

Abstract

We offer simple quasi-likelihood methods for estimating regression models with a fractional dependent variable and for performing asymptotically valid inference. Compared with log-odds type procedures, there is no difficulty in recovering the regression function for the fractional variable, and there is no need to use ad hoc transformations to handle data at the extreme values of zero and one. We also offer some new, simple specification tests by nesting the logit or probit function in a more general functional form. We apply these methods to a data set of employee participation rates in 401(k) pension plans.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Technical Working Papers with number 0147.

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Date of creation: Nov 1993
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Publication status: published as Journal of Applied Econometrics, vol.11, pp. 619-632 (1996)
Handle: RePEc:nbr:nberte:0147

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  1. Gurmu, Shiferaw & Trivedi, Pravin K., 1993. "Variable Augmentation Specification Tests in the Exponential Family," Econometric Theory, Cambridge University Press, vol. 9(01), pages 94-113, January.
  2. Gourieroux Christian & Monfort Alain & Trognon A, 1981. "Pseudo maximum likelihood methods : theory," CEPREMAP Working Papers (Couverture Orange) 8129, CEPREMAP.
  3. Jeffrey M. Wooldridge, 1987. "Specification Testing and Quasi-Maximum Likelihood Estimation," Working papers 479, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Davidson, Russell & MacKinnon, James G., 1984. "Convenient specification tests for logit and probit models," Journal of Econometrics, Elsevier, vol. 25(3), pages 241-262, July.
  5. repec:cup:etheor:v:9:y:1993:i:1:p:94-113 is not listed on IDEAS
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