I would like to use a log-log model and one of my independent variables is log (investment in machinery/employee).
Some firms report 0 investment. I have to take logs and I would like to know which approach is most approriate:
take log(investment in machinery/employee) and set log(0)=0 and add a dummy variable which is 1 when I set log(0) = 0 and 0 otherwise.
add a arbitrarily small amount x when investment is 0 and take logs(0+x).
Any other options?