On the advantage of using two or more econometric software systems to solve the same problem

Issue title: Computational Econometrics: Its Impact on the Development of Quantitative Economics

Guest editors: Charles G. Renfro

Article type: Research Article

Authors: Stokes, Houston H.^a

Affiliations: [a] Department of Economics (MC 144) College of Business Administration, University of Illinois at Chicago, 601 South Morgan Street, Room 2103, Chicago, IL 60607-7121, USA. Tel.: +1 312 996 0971; Fax: +1 312 996 3344; E-mail: [email protected] | 601 West 113th Street, #12G, New York, NY 10025, USA. E-mail: [email protected]

Abstract: This paper illustrates the dangers of relying on just one software system to solve what appears to be a fairly routine probit model. It is shown that quite different results can be obtained using various well known software systems. In this example, at a superficial level of analysis, the differences were traced to the default convergence tolerances that are built into the statistical software. At a deeper level of analysis, the effect of the convergence tolerance on the solution indicates that the maximum likelihood estimate does not exist due to a formerly undetected quasi-complete separation problem. Using a Multivariate Adaptive Regression Splines (MARS) model to relax the assumption of constant coefficients, further implications are drawn from this dataset.

DOI: 10.3233/JEM-2004-0203

Journal: Journal of Economic and Social Measurement, vol. 29, no. 1-3, pp. 307-320, 2004