Department of Economics and Business Economics

Keeping it Within Bounds: Regression Analysis of Proportions in International Business

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International business researchers commonly estimate proportions, percentages, rates, or fractions – so-called “proportional dependent variables”. In this paper, we posit that two regression strategies are particularly pertinent to the international business field: Tobit and fractional regression. Reviewing recent international business research, we find that, while fractional regression is rarely used, analyses from Tobit regression are often incomplete or erroneously interpreted with consequences for the validity of the reported results. Accordingly, we clarify how researchers should choose between Tobit and fractional regression and interpret their results. We present insights based on simple simulations and data examples with associated Stata code and a decision tree for choosing between types of models for use with proportional dependent variables.

Original languageEnglish
JournalJournal of International Business Studies
Volume51
Issue2
Pages (from-to)244-262
Number of pages19
ISSN0047-2506
DOIs
Publication statusPublished - Mar 2020

    Research areas

  • Tobit, econometrics < research methods, fractional regression, multiple regression analysis < research methods, proportional dependent variable

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