Top-coded

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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 1 Example: Top Coding of Wealth 2 Implications for OLS 3 See Also 4 References

[edit] 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

[edit] Implications for OLS

• 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.

[edit] See Also

• Tobit model
• Heckitt model
• Truncated data

[edit] References

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