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Lecture 11

:
Logistic Regression III—
Ordered Data
Prof. Sharyn O’Halloran
Sustainable Development U9611
Econometrics II

Logit/Probit Review
We first looked at logit and probit estimation
in the context of a binary dependent var.
„ Then we added the possibility of 3 or more
unordered categories for the dependent var.
„

… You

„

estimate these using multinomial logit

Now we’ll turn to the case of 3 or more
ordered categories
… Partisan

attachment: Strong Rep. → Strong Dem.
… Educational Attainment: < High School → High
School → College → Graduate Degree

g.3 ..4 Binary Probit Estimation -4 -2 0 2 4 •Binary dependent variable Y = 0 or 1 (e.2 . elect Democrat or Republican) •Estimate Probit(Y) = β0 + x1*β1 + x2*β2 + … with Stata.1 .0 . get β coefficients •Calculate Xiβ = β0 + x1i*β1 + x2i=*β2 + … for each observation .

1 .2 Predict Democrat -4 -2 0 2 4 •For observation i. if Xiβ > 0 predict Yi = 1 .4 Binary Probit Estimation Predict Republican 0 . if Xiβ < 0 then predict Yi = 0.3 ..

4 Binary Probit Estimation 0 .. -4 -2 0 2 4 •Since 0 is the dividing line.3 . just use an extreme value distribution instead of normal .2 A Z-score of 0 is the “cut-point” between the two possible outcomes.1 . we call this the “cut-point” of the estimation. •Note: with logit instead of probit.

2 .0 .3 .4 Binary Probit Estimation -4 ■ ■ -2 0 2 4 Interpretation of β1: increasing x1 by one unit changes the Zscore by β1 units The impact of this on Prob(Y=1) depends on your starting point .1 .

4 Binary Probit Estimation 0 ∆1 -4 β1 -2 0 2 4 Z-Score ■ Interpretation of β1: increasing x1 by one unit changes the Z-score by β1 units ■ The impact of this on Prob(Y=1) depends on your starting point .2 .3 .1 ..

1 . a β1 change gives a small change in P(Y=1) 0 ∆1 -4 β1 -2 0 2 4 Z-Score ■ Interpretation of β1: increasing x1 by one unit changes the Z-score by β1 units ■ The impact of this on Prob(Y=1) depends on your starting point ..2 Here.4 Binary Probit Estimation .3 .

4 Binary Probit Estimation ∆2 ..3 Now the same β1 change results in a large change in P(Y=1) 0 ∆1 -4 β1 -2 β1 0 2 4 Z-Score ■ Interpretation of β1: increasing x1 by one unit changes the Z-score by β1 units ■ The impact of this on Prob(Y=1) depends on your starting point .2 .1 .

2 .1 .4 Ordered Probit Estimation -4 -2 0 2 4 ■ Assume Y has more than two ordered categories (for instance. Medium. High) ■ We now need two cut-points to divide the curve into three sections ■ Stata will estimate these as µ1 and µ2 by the maximum likelihood procedure . Low.0 .3 .

High) •We now need two cut-points to divide the curve into three sections •Stata will estimate these as µ1 and µ2 by the maximum likelihood procedure .2 Cut-points -4 -2 µ1 0 µ2 2 4 •Assume Y has more than two ordered categories (for instance.1 .. Low.3 .4 Ordered Probit Estimation 0 . Medium.

3 .2 Predict Low -4 -2 µ1 0 µ2 2 • If Xiβ < µ1 then predict Yi = Low • If µ1 < Xiβ < µ2 then predict Yi = Medium • If Xiβ > µ2 then predict Yi = High 4 .4 Ordered Probit Estimation Predict Medium Predict High 0 .1 ..

3 .2 Predict Low -4 -2 µ1 0 µ2 2 4 • As before. a β1 coefficient shifts the Z-score by that amount .1 ..4 Ordered Probit Estimation Predict Medium Predict High 0 .

3 ..1 . a β1 coefficient shifts the Z-score by that amount •This may change the prediction on Y… .4 Ordered Probit Estimation Predict Medium Predict High 0 .2 Predict Low -4 -2 µ1 0 µ2 β1 2 4 • As before.

or it may not . a β1 coefficient shifts the Z-score by that amount •This may change the prediction on Y.2 Predict Low -4 -2 β1 µ1 0 µ2 β1 2 4 • As before.4 Ordered Probit Estimation Predict Medium Predict High 0 .1 .3 ..

39 91.Example: Swedish Partisanship .29 Somewhat to the left | 2.16 Somewhat tot he right | 2.811 3.314 Clearly to the right | 0 0 873 | 873 ----------------------+---------------------------------+---------Total | 3.28 69.29 13.438 Neither left nor righ | 0 3. tab leftright | Freq. | left-right political scale. tab leftright lr On the left-right | RECODE of leftright (On the political scale.335 3.187 | 10. where would you place | where would you place yo yourself | 1 2 3 | Total ----------------------+---------------------------------+---------Clearly to the left | 1. gen(lr) .55 Clearly to the right | 873 8.59 36. -----------------------+----------------------------------Clearly to the left | 1.373 13.373 0 0 | 1. recode leftright (1=1) (2=1) (3=2) (4=3) (5=3).333 . Percent Cum.314 22.00 -----------------------+----------------------------------Total | 10.438 23.335 Somewhat tot he right | 0 0 2.333 100.88 Neither left nor right | 3.45 100.00 .335 32.438 0 0 | 2.314 | 2.335 0 | 3.373 Somewhat to the left | 2.

lab def lr 1 "Left" 2 "Middle" 3 "Right“ .733 3.125 | 36.00 ---------------+---------------------------------+---------Male | 1. tab gender lr.02 34.00 Seems that women are more left-wing .29 26.264 3.24 30. row | lr Gender | Left Middle Right | Total ---------------+---------------------------------+---------Female | 1.513 1.107 | 39.018 | 34.765 | 5. lab val lr lr .17 | 100.69 | 100.68 30.740 1.128 | 10.89 | 100.87 32.Example: Swedish Partisanship .00 ---------------+---------------------------------+---------Total | 3.15 35.751 1.993 1.363 | 5.

Example: Swedish Partisanship .984 | 36.81 36.210 1.658 | 4.269 | 28.46 | 100.87 14.00 ----------------------+---------------------------------+---------No | 1.333 | 37. row Are you a member of a | lr labor union | Left Middle Right | Total ----------------------+---------------------------------+---------Yes. TCO-union (WHite | 761 505 576 | 1.92 | 100. LO-union (Blue-c | 1.00 Seems that union members are more left-wing as well .673 3.84 | 100.20 37.42 31.34 32.04 | 100.099 | 9.27 | 100.199 962 379 | 2. SACO-union (Acad | 503 344 486 | 1.17 31.00 ----------------------+---------------------------------+---------Yes.82 38.401 1.79 32.73 25. tab union lr.842 | 41.540 | 47.00 ----------------------+---------------------------------+---------Total | 3.00 ----------------------+---------------------------------+---------Yes.31 27.212 3.

1 Slightly more likely to be liberal if you are young. 1900 1920 1940 1960 What year were you born 1980 twoway lowess lr birthyear.3 Example: Swedish Partisanship lowess lr birthyear 2 Not much of a birth-year effect. bwidth(8) ylab(1 2 3) ysc(range(1 3)) .

000 .39 0.0220 -----------------------------------------------------------------------------lr | Coef.000 .3047193 .0153667 19.678 -10209.3348375 -------------+---------------------------------------------------------------_cut1 | -3.0011821 -1.047 -.99 0. ologit lr birthyear gender union Iteration Iteration Iteration Iteration 0: 1: 2: 3: log log log log likelihood likelihood likelihood likelihood Ordered logit estimates Log likelihood = -10209.011 -10209.314 = = = = -10439.538721 2. z P>|z| [95% Conf.Example: Swedish Partisanship .0046695 -.922106 2. Err.315 -10209. Interval] -------------+---------------------------------------------------------------birthyear | -.314431 ------------------------------------------------------------------------------ As predicted.2848512 . Birthyear is also significant.3595469 union | .274601 .83 0.2101555 . gender and union are significant predictors of ideological affiliation.0023528 .47 0. Std.314 Number of obs LR chi2(3) Prob > chi2 Pseudo R2 = = = = 9524 459.0000 0. .000036 gender | .314659 (Ancillary parameters) _cut2 | -2.0381107 7.

Example: Swedish Partisanship .00004055 Right -.07011548 -.0872556 -.00054216 .14116572 .00004053 -.07021927 Middle . .00054217 Middle -.00525127 Right .00805739 -.2117486 -.02408424 .0005016 -.00489005 .3081826 union 2.03748706 -.74139 1.00647545 .04370405 .500026 Right .36014012 birthyear 1959. holding the others constant at their mean.0087086 .00521764 .03979316 .03281152 -.00490888 Right .00036143 .06564089 Middle .0606747 .0629 Middle .24547 Use Stata “prchange” command to obtain marginal effects of each independent variable.02652879 .0437606 Left -.064968 gender Min->Max -+1/2 -+sd/2 MargEfct union Min->Max -+1/2 -+sd/2 MargEfct Pr(y|x) x= sd(x)= Left .02187435 .00065121 -.18766433 .00580573 .06489784 .06066984 .00050162 Avg|Chg| .06555989 -.00230613 -.05817041 .04681284 Left -.0437066 .08078018 .00036145 Left . prchange ologit: Changes in Predicted Probabilities for lr birthyear Min->Max -+1/2 -+sd/2 MargEfct Avg|Chg| .06555608 -.48 16.50073 .00488138 .33167729 gender 1.0303604 .06073202 Avg|Chg| .00245112 .04674365 .

00004053 -.74139 1.24547 Right .00245112 .00488138 .48 16.064968 Use Stata “prchange” command to obtain marginal effects of each independent variable.500026 Middle .00490888 Right .06489784 .03979316 .18766433 .00065121 -.06564089 Middle .00036143 .00580573 .03748706 -.00036145 Left .2117486 -.08078018 .00647545 .00489005 .02187435 .0629 Left -.00054217 Middle -.3081826 union 2.0872556 -.00050162 Avg|Chg| .00230613 -.02408424 .07011548 -.0303604 .07021927 Middle .50073 .36014012 birthyear 1959.33167729 gender 1.05817041 .Example: Swedish Partisanship .06555989 -. We see that the Marginal Effect of birthyear .00805739 -.0437066 . holding the others constant at their mean.04370405 .06066984 .04681284 Left .04674365 .06073202 gender Min->Max -+1/2 -+sd/2 MargEfct union Min->Max -+1/2 -+sd/2 MargEfct Pr(y|x) x= sd(x)= Avg|Chg| .00521764 .00525127 Right .02652879 .0437606 Left -.00054216 .0087086 .0005016 -.00004055 Right -.14116572 . prchange ologit: Changes in Predicted Probabilities for lr birthyear Min->Max -+1/2 -+sd/2 MargEfct Avg|Chg| .03281152 -.0606747 .06555608 -.

00050162 Avg|Chg| .00490888 Right .00036145 Left .3081826 union 2.03979316 .2117486 -.06489784 .0872556 -. prchange ologit: Changes in Predicted Probabilities for lr birthyear Min->Max -+1/2 -+sd/2 MargEfct Avg|Chg| .07011548 -. .05817041 .02652879 .0437066 .04370405 .33167729 gender 1.064968 Use Stata “prchange” command to obtain marginal effects of each independent variable.04674365 .06073202 gender Min->Max -+1/2 -+sd/2 MargEfct union Min->Max -+1/2 -+sd/2 MargEfct Pr(y|x) x= sd(x)= Avg|Chg| .0087086 .06555989 -.Example: Swedish Partisanship .04681284 Left .00488138 . We see that the Marginal Effect of birthyear is much less than either gender or union.00805739 -.00521764 .08078018 .00036143 .00004055 Right -.00525127 Right .06555608 -.0629 Left -.0437606 Left -.00489005 .0005016 -.48 16.00647545 .03281152 -.03748706 -.0606747 .00580573 .02187435 .02408424 .06564089 Middle .36014012 birthyear 1959.00004053 -. holding the others constant at their mean.14116572 .00065121 -.18766433 .0303604 .74139 1.24547 Right .00054217 Middle -.50073 .00230613 -.07021927 Middle .00054216 .06066984 .500026 Middle .00245112 .

99 0.0023528 .314 Number of obs LR chi2(3) Prob > chi2 Pseudo R2 = = = = 9524 459.2101555 . . z P>|z| [95% Conf.314431 ------------------------------------------------------------------------------ ■ These are the estimates of the cut-points µ1 and µ2 ■ The standard errors compare the cut-points to 0 ■ But we really don’t care about that.0011821 -1.0220 -----------------------------------------------------------------------------lr | Coef.314659 (Ancillary parameters) _cut2 | -2. Std. Err.2848512 . we want to know if they are different from each other.0046695 -.0000 0.0381107 7.274601 .000036 gender | .Example: Swedish Partisanship .538721 2.047 -.39 0.922106 2. ologit lr birthyear gender union Ordered logit estimates Log likelihood = -10209.3047193 .47 0.3348375 -------------+---------------------------------------------------------------_cut1 | -3.3595469 union | .83 0.000 . Interval] -------------+---------------------------------------------------------------birthyear | -.000 .0153667 19.

z P>|z| [95% Conf.000 . then we can eliminate the middle category.2848512 .99 0.314 Number of obs LR chi2(3) Prob > chi2 Pseudo R2 = = = = 9524 459.0000 0. Err.83 0.314659 (Ancillary parameters) _cut2 | -2.2101555 . Std.39 0.314431 ------------------------------------------------------------------------------ ■ If they are equal. .Example: Swedish Partisanship .922106 2.0220 -----------------------------------------------------------------------------lr | Coef.0023528 .000036 gender | . Interval] -------------+---------------------------------------------------------------birthyear | -.3047193 .47 0.0153667 19. ologit lr birthyear gender union Ordered logit estimates Log likelihood = -10209.538721 2.0011821 -1.274601 .000 .3348375 -------------+---------------------------------------------------------------_cut1 | -3.0046695 -.0381107 7. ■ So we should test for the equality of these cutpoints.3595469 union | .047 -.

0220 -----------------------------------------------------------------------------lr | Coef. Err.2848512 .3047193 ._cut2 = 0 chi2( 1) = 3829.0046695 -.314659 (Ancillary parameters) _cut2 | -2.0023528 .99 0.3595469 union | .0011821 -1.314431 ------------------------------------------------------------------------------ test _b[_cut1] = _b[_cut2] ( 1) _cut1 .3348375 -------------+---------------------------------------------------------------_cut1 | -3.2101555 .0153667 19. Std. ologit lr birthyear gender union Ordered logit estimates Log likelihood = -10209.000036 gender | .0000 0.314 Number of obs LR chi2(3) Prob > chi2 Pseudo R2 = = = = 9524 459.274601 . .538721 2. Interval] -------------+---------------------------------------------------------------birthyear | -.000 .922106 2.Example: Swedish Partisanship .68 Prob > chi2 = 0.39 0.0000 So we reject the null that the two cutpoints are equal.047 -.000 . z P>|z| [95% Conf.0381107 7.47 0.83 0.