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Econometrics 2014, 2(3), 123-144; doi:10.3390/econometrics2030123

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

1
Department of Economics and Social Sciences, University of Salzburg, Residenzplatz 9, 5010 Salzburg, Austria
2
The Austrian Center for Labor Economics and the Analysis of the Welfare State,c/o Rudolf Winter-Ebmer, Altenbergerstr. 69, 4040 Linz, Austria
3
Department of Economics, University of Innsbruck, Universitaetsstrasse 15, 6020 Innsbruck, Austria
4
Austrian Institute of Economic Research (WIFO), Objekt 20, Arsenal, 1030 Vienna, Austria
*
Author to whom correspondence should be addressed.
Received: 7 July 2014 / Revised: 28 August 2014 / Accepted: 10 September 2014 / Published: 19 September 2014
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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). View Full-Text
Keywords: fractional response models for ratios of integers; one-part versus two-part models; Wald test; LM test; LR test fractional response models for ratios of integers; one-part versus two-part models; Wald test; LM test; LR test
This is an open access article distributed under the Creative Commons Attribution License (CC BY 3.0).

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MDPI and ACS Style

Oberhofer, H.; Pfaffermayr, M. Two-Part Models for Fractional Responses Defined as Ratios of Integers. Econometrics 2014, 2, 123-144.

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