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Two-Part Models for Fractional Responses Defined as Ratios of Integers

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  • Harald Oberhofer

    (Department of Economics and Social Sciences, University of Salzburg, Residenzplatz 9, 5010 Salzburg, Austria
    The Austrian Center for Labor Economics and the Analysis of the Welfare State,c/o Rudolf Winter-Ebmer, Altenbergerstr. 69, 4040 Linz, Austria)

  • Michael Pfaffermayr

    (Department of Economics, University of Innsbruck, Universitaetsstrasse 15, 6020 Innsbruck, Austria
    Austrian Institute of Economic Research (WIFO), Objekt 20, Arsenal, 1030 Vienna, Austria)

Abstract

This paper discusses two alternative two-part models for fractional response variables that are defined as ratios of integers. The first two-part model assumes a Binomial distribution and known group size. It nests the one-part fractional response model proposed by Papke and Wooldridge (1996) and, thus, allows one to apply Wald, LM and/or LR tests in order to discriminate between the two models. The second model extends the first one by allowing for overdispersion in the data. We demonstrate the usefulness of the proposed two-part models for data on the 401(k) pension plan participation rates used in Papke and Wooldridge (1996).

Suggested Citation

  • Harald Oberhofer & Michael Pfaffermayr, 2014. "Two-Part Models for Fractional Responses Defined as Ratios of Integers," Econometrics, MDPI, vol. 2(3), pages 1-22, September.
    • Handle: RePEc:gam:jecnmx:v:2:y:2014:i:3:p:123-144:d:40457
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    More about this item

    Keywords

    fractional response models for ratios of integers; one-part versus two-part models; Wald test; LM test; LR test;
    All these keywords.

    JEL classification:

    • B23 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Econometrics; Quantitative and Mathematical Studies
    • C - Mathematical and Quantitative Methods
    • C00 - Mathematical and Quantitative Methods - - General - - - General
    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs

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