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Review of Tobit, Heckman and double hurdle econometric models: supported with evidences from the studies conducted in Ethiopia

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  • Adem Kelifa

    (Gambella University)

Abstract

Econometric models are crucial element in any economic and its related data analysis to put better conclusion and forward an interesting recommendations. Therefore, model selection needs critical attention when dealing with this issue. It is tried to present the review of Tobit, Heckman two step, Heckman maximum likelihood and double hurdle econometric models in this paper. The rationale behind selection of those models is that it is difficult to strictly determine which model to use among them during development of research proposal and those models are being used in a various thematic areas currently. Therefore, this paper is supported with the review of empirical studies conducted in Ethiopia on the agricultural commercialization, particularly, market orientation and participation. The result of reviewed literatures and empirical studies shows that likelihood ratio test can be used to check for whether Tobit or double hurdle model best fit the data. Heckman two step can be used if inverse mill ratio is found significant. In the case where inverse mill ratio of Heckman two step model is not significant, Vuong test can be applied to compare Heckman maximum likelihood and double hurdle model. To sum up, based on the theoretical and empirical reviews, it is recommended to select the appropriate econometric model by performing recommended statistical tests.

Suggested Citation

  • Adem Kelifa, 2023. "Review of Tobit, Heckman and double hurdle econometric models: supported with evidences from the studies conducted in Ethiopia," SN Business & Economics, Springer, vol. 3(6), pages 1-14, June.
    • Handle: RePEc:spr:snbeco:v:3:y:2023:i:6:d:10.1007_s43546-023-00478-5
    DOI: 10.1007/s43546-023-00478-5
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    References listed on IDEAS

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