Home  >>  Archives  >>  Volume 9 Number 4  >>  st0179

The Stata Journal
Volume 9 Number 4: pp. 584-592

Subscribe to the Stata Journal

Fitting and interpreting Cragg's tobit alternative using Stata

William J. Burke
Department of Agricultural, Food, and Resource Economics
Michigan State University
East Lansing, MI
Abstract.  In this article, I introduce the user-written command craggit, which simultaneously fits both tiers of Cragg’s (1971, Econometrica 39: 829–844) “twotier” (sometimes called “two-stage” or “double-hurdle”) alternative to tobit for corner-solution models. A key limitation to the tobit model is that the probability of a positive value and the actual value, given that it is positive, are determined by the same underlying process (i.e., the same parameters). Cragg proposed a more flexible alternative that allows these outcomes to be determined by separate processes through the incorporation of a probit model in the first tier and a truncated normal model in the second. Also, tobit is nested in craggit, making the latter a popular choice among “two-tier” models. In the article, I also present postestimation syntax to facilitate the understanding and interpretation of results.
Terms of use     View this article (PDF)

View all articles by this author: William J. Burke

View all articles with these keywords: craggit, two tier, two stage, double hurdle, corner-solution models, Craggit's tobit

Download citation: BibTeX  RIS

Download citation and abstract: BibTeX  RIS