Do File STATA – Probit ModelMarch 3, 2014
Khan AcademyMarch 5, 2014
- x1, x2 and x3 are more likely to have a contract with middlemen, and x4, x5 and x6 are less likely to have a contract.
- Marginal effect (ME): x1, x2 and x3 are N% more likely to have a contract with middlemen.
- The predicted probabilities are limited between 0 and 1.
- Probit are estimated using the ML method.
- an increase in x increases/decreases the likelihood that y=1
- an increase in x makes the outcome of 1 more likely.
- We interpret the sign of the coefficient but not the magnitude.
- The magnitude can’t be interpreted using the coefficient because different model has a different scales of coefficient.
- Interpret ME: an increase in x increase the probability y=1, by the marginal effect expressed as a percent. We can interpret both sign and magnitude.
- Predicted probability indicate the likelihood of y=1, if the predicted prob is greater than 0.5 we can predict that y=1, others y=0.