Appendix E
Type-1 Tobit Model
(Source: Franses and Paap [1])
For a type-1 Tobit model, the censored variable 
is 0 if the unobserved latent variable 
is less than or equal to 0 and 
if 
is positive,
(E.1) 
(E.2) 
with 
. For observations 
that are 0, we know only that
Maximum likelihood estimation is used to estimate the Tobit model. The likelihood function consists of two parts: the probability that an observation is censored is given by Equation E.3; and the density of the non-censored observations is a standard normal density. The likelihood function is
(E.4)
where . It is more convenient ...
