GHDP 748 February 21

If the confidence interval includes zero, it is not significant at the 5% level.

If confidence intervals overlap, then the difference between them is not

significant? No.

Iff facacy the test is not is are these two estimates different from one
another.
If there is no overlap, you can be sure that they are statistically
significant difference between the two estimates at 95% confidence
interval.

But if there is overlap, you cant conclude that it is not statistically

significant.

9 + 1.96 x 2.5 1.96 is the z-score.

Since the confidence interval does not include zero, they are
statistically significantly different from one another.

Graphs can tell you something, but not necessarily everything that you
want to know.

Count Variables

Means event counts number of times things have happened.

As with binary response models, we can get nonsensical predictions

OLS is a bad idea because of

-nonsensical predictions
-ols will underestimate standard errors
-when the event within a defined time period is rare, the assumption of
normality is strained.

Count data and Latent Event Rate

-underlying propensity is a latent variable.

-latent variable here is the rate at which some events occur.

-we observe how many times an event occurred, not the rate itself

Count Data and Poisson Processes

We can make two simple assumptions:

1) Multiple events cannot occur at the same point in time

2) Events are independent of one another.
Assume that all time periods are of equal length this gives rise to the
poisson distribution

Poisson distribution
-discrete distribution
-non-negative

Rate of events is the expected number of events during the observation time
period

The effect of some indepdent variable on the incidence rate

Represent our rate as a function of those xs

Implies that the mean of the expected counts is the same as the variance of
the expected counts. Here we only have one landa.

Need the mean and the standard deviation.

As landa increases, the Poisson distribution becomes more like the normal
distribution.

If landa is really high within a unit of observation, (number of Hindu/Muslim

riots across districts in India). If the incidence rate is high in most districts
you will also see a high number

OLS might be better applicable if you have lots of events.

The Poisson Model: QoI

You can use the sign of coefficients, and the significance in these models
(UNLIKE ordered logits).

You cannot get marginal effects from this.

What needs to be the case in order for us not to get marginal effects it is
not linear.

One common quantity of interest is the expected event count for a particular
set of values of X.

This is pretty much equivalent to predicited probabilities.

Expected event count is nothing more than the predicted number of events.

Poisson Model: Marginal Effects

Size of the marginal effect is going to depend on the chosen values

Incident Rate Ratio

Relative change in the expected counts for a one-unit change in some
independent variable (Xk)

Incidence rate of 7.17 times.

Similar to odds ratios

The expected count increases by

And the incident rate increases by.

They are the same thing.

Poisson Model Predicted Probabilities

What is the probability that in this particular district, we observe 9 riots? For
example

Use margins in stata for this no need to worry about the equation.

Exposure and Offset

The poisson model does not place an upper limit on the number of possible
events.

How many overrides can we observe? We can only override how many vetos
there are in the first place.

^ this is called exposure.

poisson[...],exposure(ln(varname))

poisson[...],offset(varname)
Dispersion

Suppose we have a positive contagion protests spark other protests.

The mean stays the same, but it is very difference.

A positive contageion increases the variance of observed counts, even if it

doesn not affect the mean.

Heteroskedasticiy the errors are increasing in some level of the variable.

Over time, in this case, heteroskedasticty means that the number of events
Mean is no longer equal to the variance so now poisson is misplaced.
What this is going to mean is that the standard errors are going to be
underestimated.

Poisson would be a bad model in this case but it would be overestimating

the standarad errors.

If you have over-dispersion or under-dispersion, poisson is not a good model.

Negative Binomial Model

To deal with over-dispersion, we use the negative binomial model.

What is a conditional mean? -it would be conditional on some xs

What is an unconditional mean? -it is observable data.

When we have overdispersion, the conditional mean is going to be the same

but the variance is going to be didfferent ****

If the alpha parameter is greater than zero, then it is overdispersed

If alpha is equal to zero, then poisson is the right model to use.

----Can interpret coefficients the same way, most of the things are the same
as the poisson model
----when alpha is equal to zero, it is essentially a poisson model.

Zero-inflated Models

Model the zeros with a binary model first.

Then you take all of the model with the places that di d experience an
events.

You have a mixture of a logit model and a coutn model in one.

Computationally difficult to get these models to converge

What do we use cutpoints for?

You can check to make sure these 5 categories are justified when you run a
model?
When do you use test, and when do you use lincome?

You can use either. These two tests are very similar. These two tests are
going to substatantively return another result.

Lincome is more flexible, because it is able to be used with more commands

than test is.