Multiple regression analysis has been widely used by researchers to analyze complex social problems since the 1950s. A specialization in economics, known as econometrics, developed out of a recognition that multiple regression is based on a large number of assumptions - many of which are commonly violated in specific applications. Econometricians developed tests for violations of the regression model assumptions, as well as a variety of corrective measures for estimating regression models in the presence of many of the violations. However, the mathematical sophistication required to understand the econometrics literature started out high and has continued to rise over the years. As a consequence, an understanding of the assumptions of the regression model, tests for violations, and corrective estimation approaches have failed to permeate widely into other policy-related disciplines such as political science, social work, public administration, and sociology. One of the key objectives of this book is to translate the results from the econometrics literature into language that policy analysts from other disciplines can easily understand. A second objective is to present a discussion of limited-dependent variable models. One of the assumptions of the regression model is that the dependent variable is measured on an interval scale. But often the dependent variable of interest is discrete or categorical. Whether someone is in poverty, whether they are working full-time, part-time, or out of the labour force, marital status - all are exanokes of categorical interest that might be of policy interest. Additionally, the growing availability of large-scale public use data sets containing information on individuals and families has heightened the relevance of categorical variables in policy analysis. The mathematical preparation required to understand procedures for estimating categorical models is however, more daunting than that for fully understanding and using the regression model. As with the theoretical development of the regression model, most presentations of categorical models, such as Logit and Probit, are to be found in econometric literature but often without practical advice on how to estimate and interpret model results.
