Interpretation PROBIT model

Do File STATA – Probit Model
March 3, 2014
Khan Academy
March 5, 2014
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  • 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.
Dias Satria
Dias Satria
Dias Satria, Research field :Economic development, international trade, Banking and small/medium enterprise Email. dias.satria@gmail.com Mobile Phone. +62 81 333 828 319 Office Phone. +62 341 551 396

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