Limited dependent variable
Introduction A '''limited dependent variable''' is a variable whose range ofpossible values is "restricted in some important way." In econometrics, the term is often used whenestimation of the relationship between the ''limited'' dependent variableof interest and other variables requires methods that take thisrestriction into account. For example, this may arise when the variableof interest is constrained to lie between zero and one, as inthe case of a probability, or is constrained to be positive,as in the case of wages or hours worked. ''Limited dependent variable'' models include:* Censoring, where for some individuals in a data set, some data are missing but other data are present;* Truncation, where some individuals are systematically excluded from observation (failure to take this phenomenon into account can result in selection bias);* Discrete outcomes, such as binary decisions or qualitative data restricted to a small number of categories. Discrete choice models may have either unordered or ordered alternatives; ordered alternatives may take the form of count data or ordered rating responses (such as a Likert scale).
See also * Logit, logit model, ordered logit * Multivariate probit models* Probit, probit model, ordered probit* Tobit model
See also * Censored regression model* Selection bias* Truncated regression model
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