A causal interpretation of extensive and intensive margin effects in generalized Tobit models
AbstractThe usual decomposition of effects in corner solution models into extensive and intensive margins is generally incompatible with a causal interpretation. This paper proposes a decomposition based on the joint distribution of potential outcomes which is meaningful in a causal sense. The difference between decompositions can be substantial and yield diametrically opposed results, as shown in a standard Tobit model example. In a generalized Tobit application exploring the effect of reducing firm entry regulation on bilateral trade flows between countries, estimates suggest that using the usual decomposition would overstate the contribution of the extensive margin by around 15%.
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Bibliographic InfoPaper provided by University of Zurich, Socioeconomic Institute in its series Working Papers with number 1012.
Length: 32 pages
Date of creation: Nov 2010
Date of revision:
Limited dependent variables; potential outcomes; causality; conditional-on-positives effect; Tobit; two-part model; country margins of trade;
Find related papers by JEL classification:
- C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models
- C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-11-20 (All new papers)
- NEP-ECM-2010-11-20 (Econometrics)
- NEP-INT-2010-11-20 (International Trade)
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