2. Economics 310 Lecture 23 Logit Analysis

3. Properties of Maximum Likilihood Estimator Ln(L)

4. Properties of Maximum likelihood estimator of Probit

5. Likelihood Ratio Test

6. Correcting the example in Text, Page 750

7. The logit model

8. Logit estimate of computer ownership model-Limdep

9. Logit estimate of computer ownership model

10. Shazam Commands for logit Par 2000 sample 1 13081 read (C:\d\Econometrics Classes\ECON310\Class Example\wlottq07205.asc)HESCU1A AGE PERACE PESEX PTERNWA genr COMPUTER=(HESCU1A.eq.1) genr AGESQ=AGE*AGE genr NONWHITE=(PERACE.gt.1) genr FEMALE=(PESEX.eq.2) genr EARNING=PTERNWA LOGIT COMPUTER AGE AGESQ NONWHITE FEMALE EARNING PROBIT COMPUTER AGE AGESQ NONWHITE FEMALE EARNING STOP

11. Shazam Logit Results ASYMPTOTIC WEIGHTED VARIABLE ESTIMATED STANDARD T-RATIO ELASTICITY AGGREGATE NAME COEFFICIENT ERROR AT MEANS ELASTICITY AGE -0.25081E-02 0.80329E-02 -0.31222 -0.43545E-01 -0.40950E-01 AGESQ -0.14546E-03 0.96464E-04 -1.5079 -0.10870 -0.10167 NONWHITE -0.64665 0.51282E-01 -12.610 -0.43395E-01 -0.40679E-01 FEMALE 0.23483 0.37955E-01 6.1870 0.52082E-01 0.50189E-01 EARNING 0.12823E-02 0.56115E-04 22.852 0.32904 0.28472 -0.20415 0.14842 -1.3755 -0.91387E-01 -0.86538E-01 LOG-LIKELIHOOD FUNCTION = -8542.2 LOG-LIKELIHOOD(0) = -9013.1 LIKELIHOOD RATIO TEST = 941.776 WITH 5 D.F. MADDALA R-SQUARE 0.6947E-01 CRAGG-UHLER R-SQUARE 0.92876E-01 MCFADDEN R-SQUARE 0.52245E-01 ADJUSTED FOR DEGREES OF FREEDOM 0.51882E-01 APPROXIMATELY F-DISTRIBUTED 0.66150E-01 WITH 5 AND 6 D.F. CHOW R-SQUARE 0.70356E-01

12. Expected Results Coeff LPM = Coeff Logit*0.25 except intercept Coeff LPM = Coeff Logit *0.25 + 0.5 for intercept Coeff Probit = 0.625 * coeff logit

13. Comparing Computer Ownership Results VariableLogitLinear ProbabilityProbit ObservedobservedExpectedobservedexpected Constant-0.20420.43960.4490-0.1505-0.1276 Age-.0025080.001222-.0006270.000867-0.00157 Age^2-.000145-.000053-.000036-.000116-.000091 Nonwhite-0.6466-0.1535-0.1616-0.402-0.404 Female0.23480.049450.05870.13920.1468 Earnings0.0012820.0002550.000320.0007480.00080

14. Logic of Probit Model

15. Probit Model

16. Probit Model – Group Data

17. Logit Model

18. Logit Model-Group Data

19. Computer Ownership-LPM- Group Data

20. Computer Ownership-Logit- Group Data

21. Computer Ownership-Probit- Group Data