TOP-CODED

In econometrics and statistics, a 'top coded' dataset is one for which the upper bound is not known. This is often done to preserve the anonymity of people participating in the survey (for example, if a survey included a person with wealth of $51 billion, it would not be anonymous because people would know it is Bill Gates).

Contents

Example: Top Coding of Wealth

See Also

References

Example: Top Coding of Wealth

id	age	income
1	26	24778	''exact value''
2	32	26750	''exact value''
3	45	26780	''exact value''
4	32	'30000+'	''top coded''
5	45	'30000+'	''top coded''

==Implications for Ordinary Least Squares==

★ If the lower bound of the top coded group is used as a regressor value (30000 in the example above), OLS is biased and inconsistent.

★ The top-coded group can be omitted from the regression entirely. Provided there are no systematic differences between the omitted group and the included groups, OLS is consistent and unbiased.

★ The Tobit procedure is robust to top coding, and gives unbiased estimates.

See Also

★ Tobit model

★ Heckitt model

★ Truncated data

References

★ Tobin, James (1958). "Estimation for relationships with limited dependent variables". Econometrica 26 (1), 24–36.