For long I have been a silent reader of your forum, but now I have to ask you for your expertise, as I haven't found an answer to my question yet.

Short to my back story: My aim is to calculate the predicted probabilities that a country receives development aid from a donor with Stata14. The models under evaluation are the tobit (xttobit) and the probit. The supervisor of my thesis suggested the use of the Tobit, as the dependent variable (USD value of aid flows in year t) contains roughly 35% zeroes. However, is there actually an advantage of the Tobit over the Probit if i just want the probabilities to receive aid?

In see the point of the Tobit model, if I want to calculates estimates of E(Y*) but not for estimates of Pr(0 < y < +∞).

Thanks a lot for your answers. Any help is highly appreciated.

Best, Jules

  • $\begingroup$ I decided to change my focus on the marginal effect of E(y* | x ), as it seems that the Tobit estimator is not perfectly suited for calculating the probabilities of receiving aid Pr(0 < y < +∞), as David already stated: > "The estimated probability that a country gets aid might have little relationship to how much aid a country gets." Thanks again for your comment. $\endgroup$ – Jules Watson Jun 8 '17 at 22:10

The tobit and probit methods are quite different models; they should not be seen as slightly different variations of each other.

The probit method, as you have noted, only uses information about whether or not a country received aid. It uses no information whatever about the amount of aid.

The tobit method uses information about how much aid a country receives and incorporates the characteristics of countries that receive no aid.

The estimated parameters have no relationship, in principle, when most of the observations have an observed positive value of the dependent variable. Even when a small proportion of the observations have a positive value the estimates of the coefficients can be quite different.

The estimated probability that a country gets aid might have little relationship to how much aid a country gets.

The two models estimate quite different things, an amount of aid and the occurence or nonoccurence of any aid whatever. These might depend on different independent variables or depend on them in different ways.

It is clear that the two methods are designed to meet different objectives. Decide what your purpose is and you have the answer to what methods you need.

Oh, I forgot about your advisor's role in all this.

If you can honestly tell your advisor that your objective is strictly limited to estimating the probability that aid will occur and your advisor agrees that that limited objective is adequate for your research, then you can do only that.

You should pay more attention to your advisor. Your advisor is not only in a strong position of control over your success, which you might resent. Your advisor is also, presumably, knowledgeable about the field of research you are working in and is offering advice or instruction that will help you make a contribution to research.

If you are not comfortable with your advisor, you can look for another one. Ask around and see what other faculty think. Also, give careful consideration to the published literature and evaluate your own plan with respect to what other scholars have done.

Decide for yourself whether it is easier to disagree with your advisor, find another advisor, or just do two kinds of analysis, both of which are really pretty easy to do today.

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  • $\begingroup$ Thank you very much for your extensive answer David. I understand that the Tobit estimator takes into account the USD value of the aid flow and I would highly prefer to use the Tobit over the Probit method. However, does that mean that the probability to receive aid is weighted by the aid flow amount? Of course I would like to use all the information the dependent variable has to offer, thus also the amount. However, I am wondering how do interpret predicted probabilities that I would receive with the tobit estimator and the margins command. $\endgroup$ – Jules Watson Jun 8 '17 at 18:30
  • $\begingroup$ I understand how to interpret the marginal effect of the margins ystar option - that is pretty clear to me. I just don't see the difference between predicted probabilities of the tobit and probit estimator. To me it would only makes sense, if the Tobit estimator weights the aid flows by their amounts. But is that the fact? $\endgroup$ – Jules Watson Jun 8 '17 at 18:45

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