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Local maxima in the estimation of the ZINB and sample selection models

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  • João M. C. Santos Silva

    (University of Surrey)

Abstract

It is well known that likelihood functions may have multiple (local) maxima. Unfortunately, the algorithms Stata uses to estimate some popular non-linear models can converge to local maxima of the likelihood function, and in these cases the results obtained are meaningless. This is a serious problem and users do not seem to be aware of it. In this presentation I use both the heckman and zinb commands to illustrate this problem. As an aside, I also note that Stata uses the incorrect version of Vuong's test to compare zero-inflated models with their standard counterparts.

Suggested Citation

  • João M. C. Santos Silva, 2017. "Local maxima in the estimation of the ZINB and sample selection models," United Kingdom Stata Users' Group Meetings 2017 07, Stata Users Group.
    • Handle: RePEc:boc:usug17:07
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    References listed on IDEAS

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    1. Vuong, Quang H, 1989. "Likelihood Ratio Tests for Model Selection and Non-nested Hypotheses," Econometrica, Econometric Society, vol. 57(2), pages 307-333, March.
    2. Wilson, Paul, 2015. "The misuse of the Vuong test for non-nested models to test for zero-inflation," Economics Letters, Elsevier, vol. 127(C), pages 51-53.
    3. Silva João M. C. Santos & Tenreyro Silvana & Windmeijer Frank, 2015. "Testing Competing Models for Non-negative Data with Many Zeros," Journal of Econometric Methods, De Gruyter, vol. 4(1), pages 1-18, January.
    4. Olsen, Randall J, 1982. "Distributional Tests for Selectivity Bias and a More Robust Likelihood Estimator," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 23(1), pages 223-240, February.
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