02541cam a22002657 4500001000600000003000500006005001700011008004100028100002400069245012200093260006600215490005100281500001900332520139500351530006101746538007201807538003601879690009501915690005502010700001902065710004202084830008602126856003702212856002602249t0246NBER20140725131119.0140725s1999 mau||||fs|||| 000 0 eng d1 aManning, Willard G.10aEstimating Log Modelsh[electronic resource]:bTo Transform or Not to Transform? /cWillard G. Manning, John Mullahy. aCambridge, Mass.bNational Bureau of Economic Researchc1999.1 aNBER technical working paper seriesvno. t0246 aNovember 1999.3 aData on health care expenditures, length of stay, utilization of health services, consumption of unhealthy commodities, etc. are typically characterized by: (a) nonnegative outcomes; (b) nontrivial fractions of zero outcomes in the population (and sample); and (c) positively-skewed distributions of the nonzero realizations. Similar data structures are encountered in labor economics as well. This paper provides simulation-based evidence on the finite-sample behavior of two sets of estimators designed to look at the effect of a set of covariates x on the expected outcome, E(y|x), under a range of data problems encountered in every day practice: generalized linear models (GLM), a subset of which can simply be viewed as differentially weighted nonlinear least-squares estimators, and those derived from least-squares estimators for the ln(y). We consider the first- and second- order behavior of these candidate estimators under alternative assumptions on the data generating processes. Our results indicate that the choice of estimator for models of ln(E(x|y)) can have major implications for empirical results if the estimator is not designed to deal with the specific data generating mechanism. Garden-variety statistical problems - skewness, kurtosis, and heteroscedasticity - can lead to an appreciable bias for some estimators or appreciable losses in precision for others. aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web. 7aC2 - Single Equation Models • Single Variables2Journal of Economic Literature class. 7aI1 - Health2Journal of Economic Literature class.1 aMullahy, John.2 aNational Bureau of Economic Research. 0aTechnical Working Paper Series (National Bureau of Economic Research)vno. t0246.4 uhttp://www.nber.org/papers/t0246 uurn:doi:10.3386/t0246