Why use log me odels? o Log models are invariant to the scale of the variables since measuring percent changes e They give a direct estimate of elasticity e For models with y >0, the conditional distribution is often heteroskedastic or skewed, while In(y) is much less so o The distribution of In() is more narrow limiting the effect of outliers Economics 20- Prof anderson 6Economics 20 - Prof. Anderson 6 Why use log models? Log models are invariant to the scale of the variables since measuring percent changes They give a direct estimate of elasticity For models with y > 0, the conditional distribution is often heteroskedastic or skewed, while ln(y) is much less so The distribution of ln(y) is more narrow, limiting the effect of outliers