Hidden Figures: Uncovering Quantities Behind Zeros With Econometrics

This chapter reviews the econometric approaches typically used to deal with the spike of zeros when modelling non-negative outcomes such as expenditures, income, or consumption. Relying on the assumptions of selection on observables for evaluating a policy or treatment, this chapter discusses other issues that arise with spikes of zeros in the data, including the analyst's choice between full information versus quasi-likelihood methods, considering whether observed zeros are true or masking more complex behavioural decisions, and dealing with zeros that arise due to self-selection. This chapter ends with discussions of empirical strategies to deal with these behavioural assumptions and a brief review of the literature where such strategies were employed.