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Tobit models with social interactions: Complete vs incomplete information

Author

Listed:
  • Yang, Chao
  • Lee, Lung-fei
  • Qu, Xi

Abstract

In many network data sets, the outcomes of interest are equal to zero for some agents and strictly positive for others. They can be analyzed by Tobit models with social interactions with different assumptions on information structures. Under complete information, all the observables and unobservables are publicly known. Under incomplete information, unobservables and some covariates collected by econometricians can be private information for agents. In practice, both scenarios can be feasible but will lead to different implications. A non-nested Cox-type test is proposed for the specification test. We use the Monte Carlo simulations to demonstrate its small sample properties. When applying our test to study property tax rates among adjacent municipalities in North Carolina, significant competing effects are found under both information structures. However, the Cox test is in favor of the complete information model, which implies a much larger income marginal effects and a much smaller population marginal effects on tax rates, compared to the model with incomplete information.

Suggested Citation

  • Yang, Chao & Lee, Lung-fei & Qu, Xi, 2018. "Tobit models with social interactions: Complete vs incomplete information," Regional Science and Urban Economics, Elsevier, vol. 73(C), pages 30-50.
  • Handle: RePEc:eee:regeco:v:73:y:2018:i:c:p:30-50
    DOI: 10.1016/j.regsciurbeco.2018.07.007
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    References listed on IDEAS

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    More about this item

    Keywords

    Tobit models; Cox test; Complete information; Incomplete information; Social interactions;
    All these keywords.

    JEL classification:

    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C57 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Econometrics of Games and Auctions
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models

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