How to Calculate the Marginal Effect When a Variable is Zero?

  • Context: Graduate 
  • Thread starter Thread starter ad4stra
  • Start date Start date
  • Tags Tags
    Calculation Limit
Click For Summary
SUMMARY

This discussion focuses on calculating the marginal effect of an increase in dlnx on dlny when the variable z is zero in the equation dlny=α+β1*dlnx+β2*dlnz+β3*dlnx*dlnz. The user seeks to determine the derivative ∂lny/∂lnx=β1+β3*dlnz when dlnz is undefined due to z being zero. The challenge arises from the mathematical manipulation required to address the undefined nature of dlnz, which is calculated as dlnz=ln(0)-ln(0). The discussion emphasizes the need for alternative mathematical approaches to derive a solution.

PREREQUISITES
  • Understanding of natural logarithms and their properties
  • Familiarity with differential calculus
  • Knowledge of econometric modeling and regression analysis
  • Experience with statistical software for estimating equations
NEXT STEPS
  • Research methods for handling zero values in logarithmic transformations
  • Learn about alternative approaches to calculating marginal effects in econometrics
  • Explore the implications of omitted variable bias in regression analysis
  • Investigate the use of dummy variables in econometric models
USEFUL FOR

Econometrics students, researchers conducting statistical analysis, and anyone involved in modeling economic relationships using regression techniques.

ad4stra
Messages
2
Reaction score
0
Hi everyone! I have (I think a major) problem so I'm hoping you could give me some useful advice.
I am working on my thesis where I am statistically estimating this type of equation:

dlny=α+β1*dlnx+β2*dlnz+β3*dlnx*dlnz

where dln stands for differencing a natural logarithm of the variable, eg

dlnz=ln(zt)-ln(zt-1)

so basically the approximation of the growth rate of x.

After I estimate this equation, I get certain values for α and for the βs and I have this nice equation.

My research question is:
What will be the marginal effect of an increase in dlnx on dlny if z doesn't exist (ie it is zero).

Obviously, the derivative of dlny with respect to dlnx is

∂lny/∂lnx=β13*dlnz

and now I need to calculate how much that is when z (not dlnz) doesn't exist.

Obviously, I have problem since dlnz in this case isn't defined:

dlnz=ln(0)-ln(0)

Is there any way I can manipulate mathematically my problem in order to get an answer to my question??

Thank you very much in advance!
 
Physics news on Phys.org
* so basically the approximation of the growth rate of z
 

Similar threads

  • · Replies 45 ·
2
Replies
45
Views
7K
  • · Replies 7 ·
Replies
7
Views
2K
  • · Replies 1 ·
Replies
1
Views
2K
  • · Replies 4 ·
Replies
4
Views
3K
  • · Replies 1 ·
Replies
1
Views
2K
  • · Replies 3 ·
Replies
3
Views
2K
  • · Replies 1 ·
Replies
1
Views
3K
  • · Replies 10 ·
Replies
10
Views
10K
  • · Replies 6 ·
Replies
6
Views
2K
  • · Replies 3 ·
Replies
3
Views
2K