6_binary_choice_models - 1 Research Methods in Economics...

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Unformatted text preview: 1 Research Methods in Economics ECO 4451 Qualitative Dependent Variable Models 2 Slide # 3 y 1. What are the dangers of talking on a cell phone while driving? y 2. Why are certain people promoted? y 3. Why were you admitted to this program? y 4. What do these teams have in common? { Utah Jazz { St. Louis Rams { LA Dodgers { Indianapolis Colts { Sacramento Kings Dummy Variable as DV 4 What voter characteristics influence voting for Obama? Age Presence of school-age children Gender Race Political party affiliation If you were told to estimate a regression to answer the above question . . . What would be your IVs? What would be your DV? Dummy Variable as DV (cont.) (see note) Slide # 5 y What determines whether or not a professional sport franchise moves? { Profit? { Attendance? { Playing in a public stadium/arena? { Winning percentage? { Others ? y If you were told to estimate a regression to answer the above question . . . What would be your IVs? What would be your DV? Introduction 6 y Background { Key characteristic A dependent variable that takes only a limited number of values 2 Background Slide # 7 { Four types 1. Count data | Number of As on exam 2, number of wins 2. Qualitative responses | Graduate or not, promoted or not, move or stay 3. Rankings | 0 = strongly disagree, . . . , 4 = strongly agree 4. Categories | occupational field chosen (clerical, managerial, engineer, etc. ) | Travel mode chosen (walk, bicycle, private vehicle, public transportation) Introduction Slide # 8 y Qualitative responses { A dependent variable that takes only a limited number of values Graduate or not, promoted or not, move or stay { Simplest case: only two values { Also called Binary Choice Models a) Whenever DV takes only two values Introduction (cont.) Slide # 9 { 3. Examples a) What factors lead consumers to buy your company's product or service vs. not buy it? b) What factors make some sport franchises move and others stay? c) Why did many people vote for Obama and others vote for McCain? d) What are the characteristics that make some people acceptable jurors and make others not acceptable? Introduction (cont.) Slide # 10 { 4. All of these example share a common characteristic a) DV with only two values | (1) Buy or not buy | (2) Move vs. stay | (3) Vote for Obama vs. vote for McCain | (4) Acceptable juror vs. not acceptable Everything That Follows Refers to Binary Choice Models MOVE ? STAY ? Do Not Use OLS Slide # 12 y A. Model: Y = + X + Example { 1. Y is probability that franchise moves { 2. X is attendance { 3 Although Y is probability { 3. Although Y is probability. . . . 3 Do Not Use OLS (cont.) Slide # 13 (recall: Y is probability) { 4. Y equals a) 1 for those that move b) 0 for those that stay { 5 Y is dummy variable { 5. Y is dummy variable Do Not Use OLS (cont.) Slide # 14 { Don't use OLS when Y is dummy variable because . . ....
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This note was uploaded on 09/09/2011 for the course ECON 4451 taught by Professor Richardhofler during the Fall '11 term at University of Central Florida.

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6_binary_choice_models - 1 Research Methods in Economics...

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