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Modelling Tobacco Consumption with a Zero-Inflated Ordered Probit Model

  • Xueyan Zhao
  • Mark Harris

It is quite often in economics that we wish to model a discrete ordered random variable, such as bond ratings, employment status, consumption levels and so on. However, traditional approaches to modelling such a discrete ordered random variable ignore both the potential build-up of zero obsersavtions typically observed and, relatedly, that these zeros might come from two distinct situations: non-participants and infrequent consumers. Analogously to the zero inflated (augmented) poisson (and negative binomial) count models, we propose a zero inflated Ordered Probit model. Monte Carlo results suggest that the new model performs well when the data is generated according to such a process and that a Likelihood Ratio-type statistic has good properties in selecting the correct model. Finally, the model is applied to a consumer choice problem of tobacco consumption

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Paper provided by Econometric Society in its series Econometric Society 2004 Australasian Meetings with number 363.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:ausm04:363
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