Empirical Examples

Tobin (1938) obtained the maximum likelihood estimates of his model ap­plied to data on 735 nonfarm households obtained from Surveys of Consumer Finances. The dependent variable of his estimated model was actually the ratio of total durable goods expenditure to disposable income and the inde­pendent variables were the age of the head of the household and the ratio of liquid assets to disposable income.

Since then, and especially since the early 1970s, numerous applications of the standard Tobit model have appeared in economic journals, encompassing a wide range of fields in economics. A brief list of recent representative refer­ences, with a description of the dependent variable (y) and the main indepen­dent variables (x), is presented in Table 10.1. In all the references, except that by Kotlikoff, who uses a two-step estimation method to be discussed later, the method of estimation is maximum likelihood.

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