Top-coded

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).

Example: Top-coding of wealth

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.

ee also

*Tobit model
*Heckitt model
*Truncated data
*Censoring (statistics)

References

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


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