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Econometric methods for fractional response variables with an application to 401(k) plan participation rates

  1. Leslie E. Papke,
  2. Jeffrey M. Wooldridge

Article first published online: 4 DEC 1998

DOI: 10.1002/(SICI)1099-1255(199611)11:6<619::AID-JAE418>3.0.CO;2-1

Issue

Journal of Applied Econometrics

Journal of Applied Econometrics

Volume 11, Issue 6, pages 619–632, November 1996

Additional Information

How to Cite

Papke, L. E. and Wooldridge, J. M. (1996), Econometric methods for fractional response variables with an application to 401(k) plan participation rates. Journal of Applied Econometrics, 11: 619–632. doi: 10.1002/(SICI)1099-1255(199611)11:6<619::AID-JAE418>3.0.CO;2-1

Author Information

  1. Department of Economics, Michigan State University, Marshall Hall, East Lansing, MI 48824-1038, USA

Publication History

  1. Issue published online: 4 DEC 1998
  2. Article first published online: 4 DEC 1998
  3. Manuscript Revised: 19 FEB 1996
  4. Manuscript Received: 25 OCT 1993

Funded by

  • Alfred P. Sloan Foundation

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Abstract

We develop attractive functional forms and simple quasi-likelihood estimation methods for regression models with a fractional dependent variable. Compared with log-odds type procedures, there is no difficulty in recovering the regression function for the fractional variable, and there is no need to use ad hoc transformations to handle data at the extreme values of zero and one. We also offer some new, robust specification tests by nesting the logit or probit function in a more general functional form. We apply these methods to a data set of employee participation rates in 401(k) pension plans.

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