Re: st: About taking log on zero values

[Maarten Buis <maartenlbuis@gmail.com>]

On Thu, Feb 20, 2014 at 5:10 PM, Alfonso Sanchez-Penalver wrote:

> The Tobit or Heckman would be intermediate estimations to estimate the ln(sales) for the values where sales equals zero. You would then use replace ln(sales) with the predicted values of the Tobit of Heckman models for those values where sales equals zero, and use that variable as an explanatory variable in the model he wants to estimate. This is common practice when you need to use a wage rate in a model and you only have rates for those people who work.

I understood that you meant something like that and it sounds wrong to
me: the value log(0) should take in the model of interest is not a
characteristic of sales alone but of the form of the relationship
between sales and the dependent variable y. Tobit or Heckman models
are not tools for determining that shape. In case of a wage as an
independent variable I would definately prefer to use log(wage), set
to min(wage) when not working, combined with an indicator variable for
not-working, rather then trying to force these qualitatively different
states into one variable.

-- Maarten

---------------------------------
Maarten L. Buis
WZB
Reichpietschufer 50
10785 Berlin
Germany

http://www.maartenbuis.nl
---------------------------------

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