Modeling

MODELING COUNT DATA
This definitive entry-level text, authored by a leading statistician in the field,

offers clear and concise guidelines on how to select, construct, interpret, and
evaluate count data. Written for researchers with little or no background
in advanced statistics, the book presents treatments of all major models,
using numerous tables, insets, and detailed modeling suggestions. It begins
by demonstrating the fundamentals of modeling count data, including a thorough presentation of the Poisson model. It then works up to an analysis of the
problem of overdispersion and of the negative binomial model, and finally to
the many variations that can be made to the base count models. Examples in
Stata, R, and SAS code enable readers to adapt models for their own purposes,
making the text an ideal resource for researchers working in health, ecology,
econometrics, transportation, and other fields.
Joseph M. Hilbe is a solar system ambassador with NASAs Jet Propulsion Laboratory, California Institute of Technology; an adjunct professor of statistics
at Arizona State University; an emeritus professor at the University of Hawaii;
and an instructor for Statistics.com, a web-based continuing-education program in statistics. He is currently president of the International Astrostatistics
Association, and he is an elected Fellow of the American Statistical Association, for which he is the current chair of the section on Statistics in Sports.
Author of several leading texts on statistical modeling, Hilbe also serves as
the coordinating editor for the Cambridge University Press series Predictive
Analytics in Action.
Other Statistics Books by Joseph M. Hilbe

Generalized Linear Models and Extensions (2001, 2007, 2013 with
J. Hardin)
Generalized Estimating Equations (2002, 2013 with J. Hardin)
Negative Binomial Regression (2007, 2011)
Logistic Regression Models (2009)
Solutions Manual for Logistic Regression Models (2009)
R for Stata Users (2010 with R. Muenchen)
Methods of Statistical Model Estimation (2013 with A. Robinson)
A Beginners Guide to GLM and GLMM with R: A Frequentist and Bayesian
Perspective for Ecologists (2013 with A. Zuur and E. Ieno)
QuasiLeast Squares Regression (2014 with J. Shults)
Practical Predictive Analytics and Decisioning Systems for Medicine (2014
with L. Miner, P. Bolding, M. Goldstein, T. Hill, R. Nisbit, N. Walton, and
G. Miner)
MODELING COUNT DATA

JOSEPH M. HILBE
Arizona State University
and
Jet Propulsion Laboratory,
California Institute of Technology
32 Avenue of the Americas, New York, NY 10013-2473, USA

Cambridge University Press is part of the University of Cambridge.
It furthers the Universitys mission by disseminating knowledge in the pursuit of
education, learning, and research at the highest international levels of excellence.
www.cambridge.org
Information on this title: www.cambridge.org/9781107611252

C Joseph M. Hilbe 2014
This publication is in copyright. Subject to statutory exception

and to the provisions of relevant collective licensing agreements,
no reproduction of any part may take place without the written
permission of Cambridge University Press.
First published 2014
A catalog record for this publication is available from the British Library.
ISBN 978-1-107-02833-3 Hardback
ISBN 978-1-107-61125-2 Paperback
Additional resources for this publication at www.cambridge.org/9781107611252
Cambridge University Press has no responsibility for the persistence or accuracy of URLs for external or
third-party Internet web sites referred to in this publication and does not guarantee that any content on
such web sites is, or will remain, accurate or appropriate.
Contents
Preface
xi
Chapter 1
Varieties of Count Data
Some Points of Discussion

1.1 What Are Counts?
1.2 Understanding a Statistical Count Model
1.2.1 Basic Structure of a Linear Statistical Model
1.2.2 Models and Probability
1.2.3 Count Models
1.2.4 Structure of a Count Model
1.3 Varieties of Count Models
1.4 Estimation the Modeling Process
1.4.1 Software for Modeling
1.4.2 Maximum Likelihood Estimation
1.4.3 Generalized Linear Models and IRLS Estimation
1.5 Summary
Chapter 2
Poisson Regression
1
1
3
3
7
9
16
18
22
22
23
31
33
35

2.1 Poisson Model Assumptions
2.2 Apparent Overdispersion
35
36
39
v
vi
CONTENTS
2.3 Constructing a True Poisson Model

2.4 Poisson Regression: Modeling Real Data
2.5 Interpreting Coefficients and Rate Ratios
2.5.1 How to Interpret a Poisson Coefficient and
Associated Statistics
2.5.2 Rate Ratios and Probability
2.6 Exposure: Modeling over Time, Area, and Space
2.7 Prediction
2.8 Poisson Marginal Effects
2.8.1 Marginal Effect at the Mean
2.8.2 Average Marginal Effects
2.8.3 Discrete Change or Partial Effects
2.9 Summary
Chapter 3
Testing Overdispersion
3.1 Basics of Count Model Fit Statistics
3.2 Overdispersion: What, Why, and How
3.3 Testing Overdispersion
3.3.1 Score Test
3.3.2 Lagrange Multiplier Test
3.3.3 Chi2 Test: Predicted versus Observed Counts
3.4 Methods of Handling Overdispersion
3.4.1 Scaling Standard Errors: Quasi-count Models
3.4.2 Quasi-likelihood Models
3.4.3 Sandwich or Robust Variance Estimators
3.4.4 Bootstrapped Standard Errors
3.5 Summary
Chapter 4
Assessment of Fit
4.1 Analysis of Residual Statistics
4.2 Likelihood Ratio Test
41
48
55
55
59
62
66
68
69
70
71
73
74
74
74
81
81
84
87
88
92
92
96
99
105
106
108
108
108
112
Contents
4.2.1 Standard Likelihood Ratio Test

4.2.2 Boundary Likelihood Ratio Test
4.3 Model Selection Criteria
4.3.1 Akaike Information Criterion
4.3.2 Bayesian Information Criterion
4.4 Setting up and Using a Validation Sample
4.5 Summary and an Overview of the Modeling Process
4.5.1 Summary of What We Have Thus Far Discussed
Chapter 5
Negative Binomial Regression
5.1 Varieties of Negative Binomial Models
5.2 Negative Binomial Model Assumptions
5.2.1 A Word Regarding Parameterization of
the Negative Binomial
5.3 Two Modeling Examples
5.3.1 Example: rwm1984
5.3.2 Example: medpar
5.4 Additional Tests
5.4.1 General Negative Binomial Fit Tests
5.4.2 Adding a Parameter NB-P Negative Binomial
5.4.3 Modeling the Dispersion Heterogeneous
Negative Binomial
5.5 Summary
Chapter 6
Poisson Inverse Gaussian Regression
6.1 Poisson Inverse Gaussian Model Assumptions
6.2 Constructing and Interpreting the PIG Model
6.2.1 Software Considerations
6.2.2 Examples
6.3 Summary Comparing Poisson, NB, and PIG Models
vii
112
114
116
116
119
122
123
124
126
126
126
128
133
136
136
148
152
152
153
156
160
162
162
162
165
165
165
170
viii
CONTENTS
Chapter 7
Problems with Zeros
7.1 Counts without Zeros Zero-Truncated Models
7.1.1 Zero-Truncated Poisson (ZTP)
7.1.2 Zero-Truncated Negative Binomial (ZTNB)
7.1.3 Zero-Truncated Poisson Inverse Gaussian (ZTPIG)
7.1.4 Zero-Truncated NB-P (ZTNBP)
7.1.5 Zero-Truncated Poisson Log-Normal (ZTPLN)
7.1.6 Zero-Truncated Model Summary
7.2 Two-Part Hurdle Models
7.2.1 Poisson and Negative Binomial Logit Hurdle Models
7.2.2 PIG-Logit and Poisson Log-Normal Hurdle Models
7.2.3 PIG-Poisson Hurdle Model
7.3 Zero-Inflated Mixture Models
7.3.1 Overview and Guidelines
7.3.2 Fit Tests for Zero-Inflated Models
7.3.3 Fitting Zero-Inflated Models
7.3.4 Good and Bad Zeros
7.3.5 Zero-Inflated Poisson (ZIP)
7.3.6 Zero-Inflated Negative Binomial (ZINB)
7.3.7 Zero-Inflated Poisson Inverse Gaussian (ZIPIG)
7.4 Summary Finding the Optimal Model
Chapter 8
Modeling Underdispersed Count Data Generalized Poisson
172
172
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174
177
180
182
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185
192
194
196
196
197
197
198
199
202
206
207
210
210
Chapter 9
Complex Data: More Advanced Models
217
Types of Data and Problems Dealt with in This Chapter

9.1 Small and Unbalanced Data Exact Poisson Regression
9.2 Modeling Truncated and Censored Counts
9.2.1 Truncated Count Models
9.2.2 Censored Count Models
9.2.3 Poisson-Logit Hurdle at 3 Model
217
218
224
225
229
231
Contents
9.3
9.4
9.5
9.6
Counts with Multiple Components Finite Mixture Models

Adding Smoothing Terms to a Model GAM
When All Else Fails: Quantile Count Models
A Word about Longitudinal and Clustered Count Models
9.6.1 Generalized Estimating Equations (GEEs)
9.6.2 Mixed-Effects and Multilevel Models
9.7 Three-Parameter Count Models
9.8 Bayesian Count Models Future Directions of Modeling?
9.9 Summary
ix
232
235
238
239
239
241
245
248
252
Appendix: SAS Code
255
Bibliography
269
Index
277
Preface
Modeling Count Data is written for the practicing researcher who has a
reason to analyze and draw sound conclusions from modeling count data.
More specifically, it is written for an analyst who needs to construct a count
response model but is not sure how to proceed.
A count response model is a statistical model for which the dependent, or
response, variable is a count. A count is understood as a nonnegative discrete
integer ranging from zero to some specified greater number. This book aims
to be a clear and understandable guide to the following points:
r How to recognize the characteristics of count data
r Understanding the assumptions on which a count model is based
r Determining whether data violate these assumptions (e.g., overdispersion),
r
r
r
r
r
why this is so, and what can be done about it

Selecting the most appropriate model for the data to be analyzed
Constructing a well-fitted model
Interpreting model parameters and associated statistics
Predicting counts, rate ratios, and probabilities based on a model
Evaluating the goodness-of-fit for each model discussed
There is indeed a lot to consider when selecting the best-fitted model for
your data. I will do my best in these pages to clarify the foremost concepts
and problems unique to modeling counts. If you follow along carefully, you
should have a good overview of the subject and a basic working knowledge
needed for constructing an appropriate model for your study data. I focus
on understanding the nature of the most commonly used count models and
xi
xii
PREFACE
on the problem of dealing with both over- and underdispersion, as well

as on Poisson and negative binomial regression and their many variations.
However, I also introduce several other count models that have not had
much use in research because of the unavailability of commercial software
for their estimation. In particular, I also discuss models such as the Poisson
inverse Gaussian, generalized Poisson, varieties of three-parameter negative
binomial, exact Poisson, and several other count models that will provide
analysts with an expanded ability to better model the data at hand. Stata
and/or R software and guidelines are provided for all of the models discussed
in the text.
I am supposing that most people who will use this book start with little to no
background in modeling count response data, although readers are expected
to have a working knowledge of a major statistical software package, as well
as a basic understanding of statistical regression. I provide an overview of
maximum likelihood and iterative reweighted least squares (IRLS) regression
in Sections 1.4.2 and 1.4.3, which assume an elementary understanding of
calculus, but I consider these two sections as optional to our discussion. They
are provided for those who are interested in how the majority of models we
discuss are estimated. I recommend that you read these sections, even if
you do not have the requisite mathematical background. I have attempted
to present the material so that it will still be understood. Various terms are
explained in these sections that will be used throughout the text.
Seasoned statisticians can also learn new material from the text, but I have
specifically written it for researchers or analysts, as well as students at the
upper-division to graduate levels, who want an entry-level book that focuses
on the practical aspects of count modeling. The book is also addressed to
statistical and predictive analytics consultants who find themselves faced
with a project involving the modeling of count data, as well as to anyone with
an interest in this class of statistical models. It is written in guidebook form,
with lots of bullet points, tables, and complete statistical programming code
for all examples discussed in the book.
Many readers of this book may be acquainted with my text Negative Binomial Regression (Cambridge University Press), which was first published in
2007. A substantially enhanced second edition was published in 2011. That
text addresses nearly every count model for which there existed major statistical software support at the time of the books publication. Negative Binomial
Regression was primarily written for those who wish to understand the mathematics behind the models as well as the specifics and applications of each
Preface
xiii
model. I recommend it for those who wish to go beyond the discussions

found in Modeling Count Data.
I primarily use two statistical software packages to demonstrate examples of
the count models discussed in the book. First, the Stata 13 statistical package
(http://www.stata.com) is used throughout the text to display example model
output. I show both Stata code and output for most of the modeling examples.
I also provide R code (www.r-project.org) in the text that replicates, as far
as possible, the Stata output. R output is also given when helpful. There are
also times when no current Stata code exists for the modeling of a particular
procedure. In such cases, R is used. SAS code for a number of the models
discussed in the book is provided in the Appendix. SAS does not support
many of the statistical functions and tests discussed later in the book, but its
count-modeling capability is growing each year. I will advise readers on the
books web site as software for count models is developed for these packages.
I should mention that I have used Stat/Transfer 12 (2013, Circle Systems)
when converting data between statistical software packages. The user is able
to convert between 37 different file formats, including those used in this book.
It is a very helpful tool for those who must use more than one statistical or
spreadsheet file.
Many of the Stata statistical models discussed in the text are offered as a
standard part of the commercial package. Users have also contributed count
model commands for the use of the greater Stata community. Developers
of the user-authored commands used in the book are acknowledged at the
first use of the software. James Hardin and I have both authored and coauthored a number of the more advanced count models found in the book.
Many derive from our 2012 text Generalized Linear Models and Extensions,
3rd edition (Stata Press; Chapman & Hall/CRC). Several others in the book are
based on commands we developed in 2013 for journal article publications.
I should also mention that we also coauthored the current version of Statas
glm command (2001), although Stata has subsequently enhanced various
options over the past 12 years as new versions of Stata were released. Several
of the R functions and scripts used in the book were coauthored by Andrew
Robinson and me for use in our book (Hilbe and Robinson 2013). Data sets
and functions for this book, as well as for Hilbe (2011), are available in the
COUNT package, which may be downloaded from any CRAN mirror site. I also
recommend installing msme (Hilbe and Robinson), also available on CRAN.
I have also posted all of my user-authored Stata commands and functions, as
well as all data sets used in the book, on the books web site at the following
xiv
PREFACE
address: http://works.bepress.com/joseph hilbe/. The books page with Cambridge University Press is at www.cambridge.org/9781107611252.
The data files used for examples in the book are real data. The rwm1984and
medpar data sets are used extensively throughout the book. Other data
sets used include titanic, heart, azcabgptca, smoking, fishing,
fasttrakg, rwm5yr, nuts, and azprocedure. The data are defined
where first used. The medpar, rwm5yr, and titanic data are used more
than other data in the book. The medpar data are from the 1991 Arizona
Medicare files for two diagnostic groups related to cardiovascular procedures.
I prepared medpar in 1993 for use in workshops I gave at the time. The
rwm5yr data consist of 19,609 observations from the German Health Reform
data covering the five-year period of 19841988. Not all patients were in the
study for all five years. The count response is the number of visits made by
a patient to the doctor during that calendar year. The rwm1984 data were
created from rwm5yr, with only data from 1984 included one patient, one
observation. The well-known titanic data set is from the 1912 Titanic ship
disaster survival data. It is in grouped format with survived as the response.
The predictors are age (adult vs. child), gender (male vs. female), and class
(1st-, 2nd-, and 3rd-class passengers). Crew members have been excluded.
I advise the reader that there are parts of Chapter 3 that use or adapt
text from the first edition of Negative Binomial Regression (Hilbe 2007a),
which is now out of print, as it was superseded by Hilbe (2011). Chapter 2
incorporates two tables that were also used in the first edition. I received very
good feedback regarding these sections and found no reason to change them
for this book. Now that the original book is out of print, these sections would
be otherwise lost.
I wish to acknowledge five eminent colleagues and friends in the truest
sense who in various ways have substantially contributed to this book, either
indirectly while working together on other projects or directly: James Hardin,
director of the Biostatistics Collaborative Unit and professor, Department of
Statistics and Epidemiology, University of South Carolina School of Medicine;
Andrew Robinson, director, Australian Centre of Excellence for Risk Analysis (ACERA), Department of Mathematics and Statistics, University of Melbourne, Australia; Alain Zuur, senior statistician and director of Highland
Statistics Ltd., UK; Peter Bruce, CEO, Institute for Statistics Education (Statistics.com); and John Nelder, late Emeritus Professor of Statistics, Imperial
College, UK. John passed away in 2010, just shy of his eighty-sixth birthday;
our many discussions over a 20-year period are sorely missed. He definitely
Preface
xv
spurred my interest in the negative binomial model. I am fortunate to have

known and to have worked with these fine statisticians. Each has enriched
my life in different ways.
Others who have contributed to this books creation include Valerie
Troiano and Kuber Dekar of the Institute for Statistics Education; Professor
William H. Greene, Department of Economics, New York University, and
author of the Limdep econometrics software; Dr. Gordon Johnston, Senior
Statistician, SAS Institute, author of the SAS Genmod Procedure; Professor
Milan Hejtmanek, Seoul National University, and Dr. Digant Gupta, M.D.,
director, Outcomes Research, Cancer Treatment Centers of America, both of
whom provided long hours reviewing early drafts of the book manuscript.
Helen Wheeler, production editor for Cambridge University Press, is also
gratefully acknowledged. A special acknowledgment goes to Patricia Branton
of Stata Corp., who has provided me with statistical support and friendship
for almost a quarter of a century. She has been a part of nearly every text I
have written on statistical modeling, including this book.
There have been many others who have contributed to this book as well,
but space limits their express acknowledgment. I intend to list all contributors
on the books web site. I invite readers to contact me regarding comments
or suggestions about the book. You may email me at hilbe@asu.edu or at the
address on my BePress web site listed earlier.
Finally, I must also acknowledge Diana Gillooly, senior editor for mathematical sciences with Cambridge University Press, who first encouraged me
to write this monograph. She has provided me with excellent feedback in my
attempt to develop a thoroughly applied book on count models. Her help
with this book has been invaluable and goes far beyond standard editorial
obligations. I also wish to thank my family for yet again supporting my writing of another book. My appreciation goes to my wife, Cheryl L. Hilbe, my
children and grandchildren, and our white Maltese dog, Sirr, who sits close
by my side for hours while I am typing. I dedicate this book to Cheryl for her
support and feedback during the time of this books preparation.
Joseph M. Hilbe
Florence, Arizona
August 12, 2013
CHAPTER 1
Varieties of Count Data
SOME POINTS OF DISCUSSION

r What are counts? What are count data?
r What is a linear statistical model?
r What is the relationship between a probability distribution function (PDF)
and a statistical model?
r What are the parameters of a statistical model? Where do they come from,
and can we ever truly know them?
r How does a count model differ from other regression models?

r What are the basic count models, and how do they relate with one another?
r What is overdispersion, and why is it considered to be the fundamental
problem when modeling count data?
1.1 WHAT ARE COUNTS?

When discussing the modeling of count data, its important to clarify exactly
what is meant by a count, as well as count data and count variable. The
word count is typically used as a verb meaning to enumerate units, items,
or events. We might count the number of road kills observed on a stretch of
highway, how many patients died at a particular hospital within 48 hours of
having a myocardial infarction, or how many separate sunspots were observed
in March 2013. Count data, on the other hand, is a plural noun referring
1
VARIETIES OF COUNT DATA
to observations made about events or items that are enumerated. In statistics,

count data refer to observations that have only nonnegative integer values
ranging from zero to some greater undetermined value. Theoretically, counts
can range from zero to infinity, but they are always limited to some lesser
distinct value generally the maximum value of the count data being modeled.
When the data being modeled consist of a large number of distinct values,
even if they are positive integers, many statisticians prefer to model the counts
as if they were continuous data. We address this issue later in the book.
A count variable is a specific list or array of count data. Again, such
observations can only take on nonnegative integer values. However, in a
statistical model, a response variable is understood as being a random variable,
meaning that the particular set of enumerated values or counts could be other
than they are at any given time. Moreover, the values are assumed to be
independent of one another (i.e., they show no clear evidence of correlation).
This is an important criterion for count model data, and it stems from the fact
that the observations of a probability distribution are independent. On the
other hand, predictor values are fixed; that is, they are given as facts, which
are used to better understand the response.
We will be primarily concerned with four types of count variables in this
book. They are:
1. A count or enumeration of events
2. A count of items or events occurring within a period of time or over a
number of periods
3. A count of items or events occurring in a given geographical or spatial area
or over various defined areas
4. A count of the number of people having a particular disease, adjusted by
the size of the population at risk of contracting the disease
Understanding how count data are modeled, and what modeling entails, is
discussed in the following section. For readers with little background in linear
models, I strongly suggest that you read through Chapter 1 even though various points may not be fully understood. Then re-read the chapter carefully.
The essential concepts and relationships involved in modeling should then
be clear. In Chapter 1, I have presented the fundamentals of modeling, focusing on normal and count model estimation from several viewpoints, which
should at the end provide the reader with a sense of how the modeling process
is to be understood when applied to count models. If certain points are still
unclear, I am confident that any problem areas regarding the assessment of

fit will be clear by the time you read through Chapter 4, on assessing model
fit. Those who have taken a statistics course in which linear regression is
examined should have no problem following the presentation.
1.2 UNDERSTANDING A STATISTICAL COUNT MODEL

1.2.1 Basic Structure of a Linear Statistical Model
Statistics may be generically understood as the science of collecting and analyzing data for the purpose of classification, prediction, and of attempting to
quantify and understand the uncertainty inherent in phenomena underlying
data.
A statistical model describes the relationship between one or more variables
on the basis of another variable or variables. For the purpose of the models we
discuss in this book, a statistical model can be understood as the mathematical
explanation of a count variable on the basis of one or more explanatory
variables.1 Such statistical models are stochastic, meaning that they are based
on probability functions. The traditional linear regression model is based on
the normal or Gaussian probability distribution and can be formalized in the
most simple case as
Y = 0 + X +
(1.1)
where Y is called the response, outcome, dependent, or sometimes just the y

variable. We use the term response or y when referring to the variable being
modeled. X is the explanatory or predictor variable that is used to explain
the occurrence of y. is the coefficient for X. It is a slope describing the rate
of change in the response based on a one-unit change in X, holding other
predictor values constant (usually at their mean values). 0 is the intercept,
which provides a value to fitted y, or y , when, or if, X has the value of 0.
(eta) is the error term, which reflects the fact that the relationship between
X and Y is not exact, or deterministic. For the normal or linear regression
model, the errors are Gaussian or normally distributed, which is the most
1
A model may consist of only the response variable, unadjusted by explanatory

variables. Such a model is estimated by modeling the response on the intercept.
For example, using R: lm(y 1); using Stata: reg y.
well-used and basic probability distribution in statistics. is also referred to

as the residual term.
When a linear regression has more than one predictor, it may be schematized by giving a separate beta and X value for each predictor, as
Y = 0 + 1 X 1 + 2 X 2 + + n X n +
(1.2)
Statisticians usually convert equation (1.2) to one that has the left-hand side
being the predicted or expected mean value of the response, based on the sum
of the predictors and coefficients. Each associated coefficient and predictor is
called a regression term:
y = 0 + 1 X 1 + 2 X 2 + + n X n
(1.3)
= 0 + 1 X 1 + 2 X 2 + + n X n
(1.4)
or
Notice that the error became part of the expected or predicted mean response.
, or hat over y and (mu), indicates that this is an estimated value. From
this point on, I use the symbol to refer to the predicted value, without a hat.
Understand, though, that when we are estimating a parameter or a statistic,
a hat should go over it. The true unknown parameter, on the other hand, has
no hat. You will also at times see the term E(y) used to mean estimated y. I
will not use it here.
In matrix form, where the individual terms of the regression are expressed
in a single term, we have
= X
(1.5)
with X being understood as the summation of the various terms, including

the intercept. As you may recall, the intercept is defined as 0 (1), or simply
0 . It is therefore a term that can be placed within the single matrix term
X. When models become complicated, viewing them in matrix form is
the only feasible way to see the various relationships involved. I should
mention that sometimes you see the term X expressed as x. I reserve this
symbol for another part of the model, which we discuss a bit later in this
section.
Lets look at example data (smoking). Suppose that we have a sixobservation model consisting of the following variables:
sbp:
male:
smoker:
age:
systolic blood pressure of subject

1 = male; 0 = female
1 = history of smoking; 0 = no history of smoking
age of subject
Using Stata statistical software, we display a linear regression of sbp on male,

smoker, and age, producing the following (nohead suppresses the display of
header statistics).
STATA CODE
. regress sbp male smoker age, nohead
-----------------------------------------------------------------------sbp |
Coef.
Std. Err.
t
P|t|
[95% Conf. Interval]
-------+---------------------------------------------------------------male |
smoker |
4.048601
6.927835
.2507664
.1946711
16.14
35.59
0.004
0.001
2.96964
6.090233
5.127562
7.765437
age |
.4698085
.02886
16.28
0.004
.3456341
.593983
cons |
104.0059
.7751557
134.17
0.000
100.6707
107.3411
------------------------------------------------------------------------
Continuing with Stata, we may obtain the predicted value, , which is the
estimated mean systolic blood pressure, and display the predictor values
together with (mu) as
. predict mu
. l
// l is an abbreviation for list
+------------------------------------+
| sbp
male smoker sge
mu
|
|------------------------------------|
1. | 131
1
1
34
130.9558 |
2. | 132
3. | 122
4. | 119
1
1
0
1
0
0
36
30
32
131.8954 |
122.1488 |
119.0398 |
5. | 123
6. | 115
0
0
1
0
26
23
123.1488 |
114.8115 |
+------------------------------------+
To see exactly what this means, we sum the terms of the regression. The
intercept term is also summed, but its values are set at 1. The _b[] term
captures the coefficient from the results saved by the software. For the intercept, _b[_cons] adds the intercept term, slope[1], to the other values. The
term xb is also commonly referred to as the linear predictor.
. gen xb = _b[male]*male + _b[smoker]*smoker + _b[age]*age + _b[_cons]
. l
+-----------------------------------------------+
| sbp
male
smoker age
mu
xb
|
|-----------------------------------------------|
1. | 131
1
1
34
130.9558
130.9558 |
2. | 132
3. | 122
4. | 119
1
1
0
1
0
0
36
30
32
131.8954
122.1488
119.0398
131.8954 |
122.1488 |
119.0398 |
5. | 123
6. | 115
0
0
1
0
26
23
123.1488
114.8115
123.1488 |
114.8115 |
+-----------------------------------------------+
The intercept is defined correctly; check by displaying it. The value is

indeed 1,
. di _cons
1
whereas _b[_cons] is the constant slope of the intercept as given in the

preceding regression output:
. di _b[_cons]
104.00589
/* intercept slope */
Using R, we may obtain the same results with the following code:
R CODE
sbp
- c(131,132,122,119,123,115)
male
- c(1,1,1,0,0,0)
smoker - c(1,1,0,0,1,0)
age
- c(34,36,30,32,26,23)
summary(reg1 - lm(sbp~ male+smoker+age))
results not displayed
Predicted values may be obtained by

mu - predict(reg1)
mu
1
2
3
4
5
6
130.9558 131.8954 122.1487 119.0398 123.1487 114.8115
As was done with the Stata code, we may calculate the linear predictor, which
is the same as , by first abstracting the coefficient
cof - reg1$coef
cof
(Intercept)
male
104.0058910
4.0486009
smoker
age
6.9278351
0.4698085
and then the linear predictor, xb. Each coefficient can be identified with [ ].
The values are identical to mu.
xb - cof[1] + cof[2]*male + cof[3]*smoker + cof[4]*age
xb
[1] 130.9558 131.8954 122.1487 119.0398 123.1487 114.8115
Notice the closeness of the observed response and predicted values. The
differences are
diff - sbp - mu
diff
1
0.04418262
2
3
4
5
0.10456554 -0.14874816 -0.03976436 -0.14874816
6
0.18851252
When the values of the linear predictor are close to the predicted or expected
values, we call the model well fitted.
1.2.2 Models and Probability

One of the points about statistical modeling rarely discussed is the relationship of the data to a probability distribution. All parametric statistical models
are based on an underlying probability distribution. I mentioned before that
the normal or linear regression model is based on the Gaussian, or normal, probability distribution (see example in Figure 1.1). It is what defines
the error terms. When we are attempting to estimate a least squares regression or more sophisticated maximum likelihood model, we are estimating
the parameters of the underlying probability distribution that characterize
the data. These two foremost methods of estimation are described in the next
section of this opening chapter. The important point here is always to remember that when modeling count data we are really estimating the parameters
of a probability distribution that we believe best represents the data we are
modeling. We are never able to knowingly determine the true parameters
.01
Density
.02
.03
100
150
Systolic Blood Pressure
200
FIGURE 1.1. Gaussian distribution approximated by blood pressure data.
of the probability distribution function, which we shall refer to as the PDF,

but we attempt to obtain the best unbiased estimate possible. The parameters
are what provide the shape of the PDF we are using to describe the data. By
knowing the estimated parameter or parameters, we can use them to predict
data from inside the sample of data from which we are modeling and in special
cases data from outside the sample.
This is also an important point to keep in mind. We assume that the
data being modeled are a random sample from a greater population of data.
The PDF whose parameters we are attempting to estimate is assumed to
describe the population data, not only the sample from it that we are actually
modeling. This way of looking at statistics and data is commonly referred to as
frequency-based statistical modeling. Bayesian models look at the relationship
of data to probability distributions in a different manner, which we discuss
in the final chapter. However, the standard way of modeling is based on
this frequency interpretation, which was championed by Ronald Fisher in
the early twentieth century and has dominated statistics since. I might say
here, though, that many statisticians are turning to Bayesian estimation when
modeling certain types of data. Again, well address this situation in the final
chapter, proposing several predictions in the process.
1.2.3 Count Models

The majority of count models discussed in this book are based on two probability distributions the Poisson and negative binomial PDFs. I add three
additional models in this volume that I consider important when initially
evaluating count data the Poisson inverse Gaussian model, or PIG, Greenes
three-parameter negative binomial P, or NB-P, and generalized Poisson (GP)
models. These five distributions are closely related. The Poisson distribution
has a single parameter to be estimated, , or the mean, which is also sometimes referred to as the location parameter. The unique feature of the Poisson
distribution is that the mean and variance are the same. The higher the value
of the mean of the distribution, the greater the variance or variability in the
data. For instance, if we are modeling the number of cars failing to properly
stop at two different stop signs per day over a period of a month, and if the
average number of failures to stop per day at Site A is 4 and at Site B is 8, we
automatically know that the variance of the distribution of failures at Site A is
also 4 and at Site B is 8. No other measurements need be done that is, if the
true distribution at each site is Poisson. Recall from algebra that the variance
is the square of the standard deviation. The mean and standard deviation of
the counts
of failures at Site A are 4 and 2, respectively, and at Site B are 8
and 2 2.
This criterion of the Poisson distribution is referred to as the equidispersion
criterion. The problem is that when modeling real data, the equidispersion
criterion is rarely satisfied. Analysts usually must adjust their Poisson model
in some way to account for any under- or overdispersion that is in the data.
Overdispersion is by far the foremost problem facing analysts who use Poisson
regression when modeling count data.
I should be clear about the meaning of overdispersion since it is central
to the modeling of count data and therefore plays an important role in this
book. Overdispersion almost always refers to excess variability or correlation
in a Poisson model, but it also needs to be considered when modeling other
count models as well. Keep in mind, however, that when the term overdispersion is used, most analysts are referring to Poisson overdispersion (i.e.,
overdispersion in a Poisson model).
Simply put, Poisson overdispersion occurs in data where the variability of
the data is greater than the mean. Overdispersion also is used to describe data
in a slightly more general sense, as when the observed or in fact variance of
the count response is greater than the variance of the predicted or expected
counts. This latter type of variance is called expected variance. Again, if the
10
observed variance of the response is greater than the expected variance, the
data are overdispersed. A model that fails to properly adjust for overdispersed
data is called an overdispersed model. As such, its standard errors are biased
and cannot be trusted. The standard errors associated with model predictors
may appear from the model to significantly contribute to the understanding
of the response, but in fact they may not. Many analysts have been deceived
into thinking that they have developed a well-fitted model.
Unfortunately, statistical software at times fails to provide an analyst with
the information needed to determine if a Poisson model is overdispersed or
underdispersed. We discuss in some detail exactly how we can determine
whether a model is overdispersed. More properly perhaps, this book will provide guidelines to help you decide whether a Poisson model is equidispersed.
Probably the most popular method of dealing with apparent Poisson
overdispersion is to model the data using a negative binomial model. The
negative binomial distribution has an extra parameter, referred to as the
negative binomial dispersion parameter. Some books and articles call the dispersion parameter the heterogeneity parameter or ancillary parameter. These
are appropriate names as well. The dispersion parameter is a measure of the
adjustment needed to accommodate the extra variability, or heterogeneity, in
the data. However, the term dispersion parameter has become the standard
name for the second parameter of the negative binomial distribution.
The negative binomial, which we discuss in more detail later, allows more
flexibility in modeling overdispersed data than does a single-parameter Poisson model. The negative binomial is derived as a Poisson-gamma mixture
model, with the dispersion parameter being distributed as gamma shaped.
The gamma PDF is pliable and allows for a wide variety of shapes. As a
consequence, most overdispersed count data can be appropriately modeled
using a negative binomial regression. The advantage of using the negative
binomial rests with the fact that when the dispersion parameter is zero (0),
the model is Poisson.2 Values of the dispersion parameter greater than zero
indicate that the model has adjusted for correspondingly greater amounts of
I term this the direct parameterization of the negative binomial. Unlike most commercial statistical software, Rs glm and glm.nb functions employ an inverted
relationship of the dispersion parameter, theta, so that a Poisson model results
when theta approaches infinity. Most subsequent R functions have followed glm
and glm.nb. I maintain the direct relationship for all count models in this volume
and discuss the differences between the two parameterizations in some detail later
in the book.
11
overdispersion. The negative binomial dispersion parameter will be symbolized as (alpha).

We will later discover that there are a variety of reasons why data can have
more variability than what is assumed based on the Poisson distribution. For
that matter, the count response variable of a negative binomial model can
also have more variability than allowed by negative binomial distributional
assumptions. In that sense, a negative binomial model may also be over- or
underdispersed. It is important to remember, though, and this point will be
repeated later, that the negative binomial model cannot be used to adjust for
Poisson underdispersion. That is:
The negative binomial model adjusts for Poisson overdispersion; it
cannot be used to model underdispersed Poisson data.
Statisticians recognize an alternative linear negative binomial model commonly referred to as NB1, which differs from the standard model described
previously, also known as NB2. I delay discussion of the NB1 model until
later in the book.
The third type of count model that I wish to introduce in this book is the
Poisson inverse Gaussian model, also fondly known as the PIG model. The
PIG model assumes that overdispersion in a Poisson model is best described,
or shaped, according to the inverse Gaussian distribution rather than the
gamma distribution that is inherent to the negative binomial model. The
reason that the PIG model has not had wide use is that until very recently
there was no software for its estimation except if analysts created the software themselves. Programming a PIG is not easy, and unless programmed
well, a PIG algorithm can take a long time to converge with appropriate
parameter estimates. The gamlss R package (Rigby and Stasinopoulos 2008)
provides support for PIG modeling and may be downloaded from CRAN. The
pigreg command (Hardin and Hilbe 2012) is available for Stata users and
may be downloaded from the authors web site or from the publishers web
sites for Hilbe (2011) or Hardin and Hilbe (2012). The PIG dispersion parameter in pigreg is also known as in that it has an interpretation similar to
that of the negative binomial dispersion parameter. Like the negative binomial, we parameterized the PIG parameter so that a value of = 0 is
Poisson.
The fourth type of count model provided in this book is a three-parameter
generalized negative binomial model designed by William Greene of New
York University, who is the author of the Limdep econometric statistical
12
TABLE 1.1. Selected Count Model MeanVariance Relationship

Model
Mean
Variance
Poisson
Negative binomial (NB1)
Negative binomial (NB2)
Poisson inverse Gaussian
Negative binomial-P
Generalized Poisson
(1 + ) = +
(1 + ) = + 2
(1 + 2 ) = + 3
(1 + ) = +
(1 + )2 = + 23 + 2 3
software program. It is called NB-P. The dispersion parameter, , of negative

binomial and PIG models has the same value for all observations in the model.
The third parameter of NB-P, called or rho in Greek, allows the dispersion
to vary across observations, providing a better opportunity to fit negative
binomial data. The underlying PDF is still a variety of negative binomial and
is usually used to help analysts decide on employing an NB1 or NB2 model
on their data. We discuss how best to implement NB-P in Section 5.4.
The fifth model that I believe to be important when first considering how
to model count data is the generalized Poisson (GP) model. Similar to the
negative binomial and PIG models, the generalized Poisson has a second
parameter, also referred to as the dispersion or scale parameter. Also like the
previously introduced models, the generalized Poisson reduces to Poisson
when the dispersion is zero. The nice feature of the generalized Poisson,
however, is that the dispersion parameter can have negative values, which
indicate an adjustment for Poisson underdispersion.
The mean and variance functions of the Poisson model and the five models
just discussed are given in Table 1.1.
R and Stata code to graph the above five distributions with a given mean of
4 and, except for the Poisson, a dispersion parameter value of 0.5 is provided
in Tables 1.2a and 1.2b, respectively. The figures produced by the code are
displayed as Figures 1.2a and 1.2b.
Note how sharply peaked the PIG distribution is at the beginning of the
distribution. This same general shape is the same for PIG regardless of the
value of alpha or the mean.
The Stata graphic of the same distributions appears in Figure 1.2b. Note
that the top of the PIG distribution is truncated at about 1.0. Care must be
TABLE 1.2A. R Code for Figure 1.2a

obs - 15; mu - 4; y - (0:140)/10; alpha - .5
amu - mu*alpha; layout(1)
all.lines - vector(mode = list, length = 5)
for (i in 1:length(mu)) {
yp = exp(-mu[i])*(mu[i]y)/factorial(y)
ynb1 = exp( log(gamma(mu[i]/alpha + y))
- log(gamma(y+1))
- log(gamma(mu[i]/alpha))
+ (mu[i]/alpha)*log(1/(1+alpha))
+ y*log(1-1/(1+alpha)))
ynb2 = exp( y*log(amu[i]/(1+amu[i]))
- (1/alpha)*log(1+amu[i])
+ log( gamma(y +1/alpha) )
- log( gamma(y+1) )
- log( gamma(1/alpha) ))
ypig = exp( (-(y-mu[i])2)/(alpha*2*y*mu[i]2))
* (sqrt(1/(alpha*2*pi*y3)))
ygp = exp( log((1-alpha)*mu[i])
+ (y-1)*log((1-alpha) * mu[i]+alpha*y)
- (1-alpha)*mu[i]
- alpha*y
- log(gamma(y+1)))
all.lines = list(yp = yp, ynb1 = ynb1, ynb2 = ynb2, ypig = ypig,
ygp = ygp)
ymax = max(unlist(all.lines), na.rm=TRUE)
cols = c("red","blue","black","green","purple")
plot(y, all.lines[[1]], ylim =
c(0, ymax), type = "n", main="5 Count Distributions:
mean=4; alpha=0.5")
for (j in 1:5)
lines(y, all.lines[[j]], ylim = c(0, ymax),
col=cols[j], type=b,pch=19, lty=j)
legend("topright",cex = 1.5, pch=19,
legend=c("NB2","POI","PIG","NB1","GP"),
col = c(1,2,3,4,5),
lty = c(1,1,1,1,1),
lwd = c(1,1,1,1,3))
}
13
5 Count Distributions: mean = 4; alpha = 0.5
0.2
0.0
0.1
all.lines[[1]]
0.3
NB2
POI
PIG
NB1
GP
10
12
14
FIGURE 1.2A. Five count distributions: mean = 4; alpha = 0.5.

TABLE 1.2B. Stata Code for Figure 1.2b
clear
set obs 15
gen byte mu = 4
gen byte y = _n-1
gen yp = (exp(-mu)*muy)/exp(lngamma(y+1))
gen alpha = .5
gen amu = mu*alpha
gen ynb = exp(y*ln(amu/(1+amu)) - (1/alpha)*ln(1+amu) + lngamma(y +1/
alpha) /*
*/ - lngamma(y+1) - lngamma(1/alpha))
gen ypig = exp((-(y-mu)2)/(alpha*2*y*mu2)) * (sqrt(1/(alpha*2*_pi
*y3)))
gen ygp = exp(ln((1-alpha)*mu) + (y-1)*ln((1-alpha)*mu+alpha*y) - /*
*/ (1-alpha)*mu - alpha*y - lngamma(y+1))
gen ynb1 = exp(lngamma(mu/alpha + y) - lngamma(y+1)- lngamma(mu/
alpha) + /*
*/ (mu/alpha)*ln(1/(1+alpha)) + y*ln(1-1/(1+alpha)))
lab var yp "Poisson"
lab var ynb "NB2"
lab var ynb1 "NB1"
lab var ypig "PIG"
lab var ygp "generalized Poisson"
graph twoway connected ygp ypig ynb1 ynb yp y, ms(s D T d S) /*
*/ title("POI | NB | NB1 | GP |PIG distributions: MEAN = 4; a=0.5")
15
.1
.2
.3
POI | NB | NB1 | GP |PIG Distributions: MEAN = 4; = 0.5
10
15
y
generalized Poisson
NB1
Poisson
PIG
NB2
FIGURE 1.2B. Stata graphic of the same distributions as in Figure 1.2a.
taken when interpreting figures such as these to assure that the entire distribution is being displayed or that a notation is provided when the distribution
appears to be truncated but is not. I advise checking the actual range of values
that are expected for a given distribution.
A sixth type of count model that will prove to be of considerable value
when modeling count data is the heterogeneous negative binomial, or NBH.
The heterogeneous negative binomial allows for the parameterization of the
dispersion parameter. That is, the dispersion parameter will have associated
predictor coefficients indicating which ones significantly contribute to the
overdispersion in the model. This feature of the NBH assists the analyst in
determining the possible source for both Poisson and negative binomial
overdispersion.
Other models will be discussed in the book as well, including truncated and zero-inflated models, hurdle models, other generalized models
with three parameters, panel models, quantile models, exact Poisson models,
Bayesian models, and others. However, the Poisson, negative binomial, and
PIG models will play primary roles when we first attempt to identify the model
that best fits the count data to be analyzed. Those models are considered
16
in Chapters 2, 5, and 6. We elaborate on the nature of overdispersion in

Chapter 3.
1.2.4 Structure of a Count Model

Nearly all of the count models we review have the basic structure of the linear
model described earlier in this section. The difference is that the left-hand
side of the equation is in log form:
ln() = 0 + 1 X 1 + 2 X 2 + + n X n
(1.6)
To isolate the predicted mean count on the left side of equation (1.6), both
sides of the equation are exponentiated, giving
= e 0 +1 X 1 +2 X 2 ++n X n
(1.7)
We will later discover that both of these expressions will be important when
defining terms in count models. Notice that there is not a linear relationship
between and the predictors as there was for the linear model. The linear
relationship is between the natural log of and the predictors.
Recall that earlier in this section I referred to the sum of regression terms
as the linear predictor. In the case of linear regression, the linear predictor is
the same as the predicted or expected value. Statisticians typically symbolize
the summation of the terms of the linear predictor for each observation in a
model as
(x)i =
n
0 + 1 X 1i + + j X ji
(1.8)
i=1
with i indicating the observation number in the model data and j the number
of predictors in the model. Notice that I used the standard mathematical
(Sigma) symbol for summation in equation (1.8). The summation starts at
the quantity indicated below Sigma and ends with the value at its top. Here
we have observation number i, starting at 1 representing the first observation in the data, and finishing with n, indicating the last observation in the
data being modeled. At times, statisticians choose not to use the summation
sign, or product sign for probabilities and likelihoods, or to use subscripts if
they believe that their readers understand that this is included in the equation even if not displayed. Subscripts and summation symbols are generally
17
not displayed if we are referring to the equation as a whole and not to the
individual components. Each author has their individual preference.
The relationship of the predicted or fitted statistic, , and the linear predictor, xb, is the same for Poisson, negative binomial, and PIG regressions.3
The term log() is called the link function since it links the linear predictor
and predicted value:
log(i ) =
n
0 + 1 X 1i + + j X ji
(1.9)
i=1
To summarize, the link between and xb is

REGRESSION
LINK RELATIONSHIP
PDF
-----------------------------------------------------------------------linear regression
identity: xb =
Gaussian or normal
major count models log:
xb = ln() Poisson, negative binomial, PIG
------------------------------------------------------------------------
An important feature of having the natural log link for count models is that
it guarantees that the predicted values will always be positive (i.e., 0).
Using a linear regression when modeling counts cannot make such a guarantee. What about the formerly common practice of logging the response
and modeling it as a linear regression (i.e., as a Gaussian model)? The result
is that predicted values are positive but substantially lower than Poisson or
negative binomial predicted values. Ideally, the predicted counts should be
close to the values of the actual counts: y . When the count response is
logged and modeled using linear regression, its predicted values are nearly
always distant from the actual or observed counts. Fit tests that match up
observed versus expected counts rarely show a significant fit. The caveat
here is
Reject the temptation to use linear regression to model a logged count
variable.
At the very start of the modeling process, its imperative to become intimately
familiar with the data you intend to model. Given that the count models
discussed in this book have a single response variable that is being modeled, it
3
Given the way that the NB and PIG models have been parameterized here.
18
TABLE 1.3. Points to Understand about Your Model

r What is the response or dependent variable? Which variable(s) are we trying
to understand on the basis of other variables?
r What type of values characterize the response variable? What types of values
are characteristic of the explanatory predictors?
r How do the predictor variables relate to one another? Are there interaction
effects or excessive correlation between them?
r What are the optimal predictors to use in order to best explain the response?
r How is the response variable distributed?
r Are there missing values in the model? If so, how are they distributed in the
data?
is important to understand the points given in Table 1.3 about your proposed
model.
These are just the foremost items that you need to know about the data you
intend to model. Aside from the data itself, though, we also must know the
context of the model we wish to develop. Whats the point? This is perhaps
a more important criterion than is at first realized. But as you will find
when traversing the book, understanding the purpose of the model, or the
purpose of the research, can help greatly when determining which predictors
to use in the model. Its not just a matter of discarding all predictors with
p-values greater than 0.05. It may be important to retain certain predictors
in a model even though they do not appear to contribute significantly to an
understanding of the response.
1.3 VARIETIES OF COUNT MODELS

I dont want to mislead you into thinking that the count response variable
being modeled, as perhaps adjusted by various explanatory predictors, actually comes from some probability generating function or probability function.
Not usually! The counts typically come from observations we make from the
world around us, or even perhaps as a result of some study design. However, as far as a statistical model is concerned, the data can be thought of
as the realization of a process that resembles the data being modeled. If we
can estimate the parameters of the distribution underlying the data with as
little bias as possible, we can use our understanding of probability to predict
observations of real events outside the model; for example, future events.
We use the underlying probability function and its estimated parameter(s) to
19
make predictions and classifications about real data data that belong to the
population of data from which the model data are considered to be a sample.
If this characterization of the relationship of probability and model data
is unclear now, I am confident that it will be clear to you by the end of the
book. It is an important distinction that is basic to the frequency-based interpretation of statistics. Essentially, in selecting the most appropriate model for
given data, the analyst is selecting a probability distribution, or mixtures of
probability distributions, that best describe the population data of which the
data being modeled are a random sample. I have mentioned this before, but
it is an extremely important fact to understand about modeling.
As indicated in the last section, there are three primary probability functions that will initially concern us in this book: the Poisson, negative binomial,
and Poisson inverse Gaussian models. Many of the other models we discuss
are variations of these models in particular, variations of the Poisson and
negative binomial models.
Data come to us in a variety of ways. They certainly do not always perfectly
match the Poisson or negative binomial PDF. For example, the Poisson, negative binomial, and PIG distributions each assume the possibility of zero counts
even if there may not in fact be any. If zero counts are not a possibility for the
data being modeled, for instance hospital length-of-stay data, then the underlying PDF may need to be amended to adjust for the excluded zero counts.
Zero-truncated (ZT) models are constructed for exactly that purpose. The
underlying PDF is adjusted so that zero counts are excluded, but the probabilities in the function still sum to 1.0, as is required for a probability function.
Having data with an excessive number of zero counts is another problem
for many count models. For example, given a specific mean value for a Poisson
distribution of counts, the probability of having zero counts is defined by the
PDF. When the mean is 2 or 3, the probability of having zero counts is quite
good. But for a mean of 10, for instance, the Poisson PDF specifies that the
probability of a zero count is very near zero. If your data have a mean value
of 5 and some 30% of the count observations consist of zeros, there is a
problem. The expected percentage of zero counts on the basis of the Poisson
PDF is well under 1%. An adjustment must be made. Typically, analysts use
either a two-part hurdle model or a mixture model, such as zero-inflated
Poisson (ZIP) or zero-inflated negative binomial (ZINB). We will also use a
zero-inflated PIG (ZIPIG), as well as other models.
Hurdle models are nearly always constructed as a two-part 0,1 response
logistic or probit regression and a zero-truncated count model. The logistic component models the probability of obtaining a nonzero count. After
20
separating the data into two components, the software creates a binary variable where all counts greater than zero (0) are assigned the value of one
(1). Zeros in the count model are zeros in the logit component. The count
component truncates or drops observations with zero values for the original
counts and, for example, models the data as a zero-truncated Poisson. The
model I describe here is a Poisson-logit hurdle model. Be aware, though, that
the binary component of the hurdle model need not itself be from a binary
model. An analyst can use a censored Poisson model, with right censoring at
1, and employ it as the binary component. This may not make much sense
at this point, but when we address censored models later in the book, it will
be clear. Most hurdle models use a logistic or probit regression for the binary
component of the hurdle.
Zero-inflated models are not simply two-part models that can be estimated
separately, as are hurdle models. Rather, zero-inflated models are mixture
models. They use logistic or probit regression for the binary component, but
both components the binary and count include the same zero counts
when being estimated. The overlap of zero counts means that the mixture
of Bernoulli (the distribution used in binary logistic regression) and Poisson
distributions must be adjusted so that the resulting PDF sums to one. The
statistical software takes care of this for you, but this overlap is important
to remember since some statisticians especially in ecology interpret the
binary zeros differently from the count zeros. I discuss this in more detail
in Chapter 7. It should also be understood that zero-inflated models, unlike
hurdle models, structure the binary component so that it models zeros instead
of ones.
The count models described here are the only ones known by many analysts. However, several three-parameter count models have been developed
that can be used on count data that fail to fit any of the standard count probability distributions, including mixtures of distributions. We will focus our
attention on one of these models the generalized NBP negative binomial
model. The NBP model parameterizes the exponent on the second term of the
negative binomial variance. Recall that the negative binomial variance function is + 2 . We may symbolize the parameter as (rho), representing
the power + . , , and are all parameters to be estimated.
Actually, there is another model we have only alluded to in our discussion
thus far, the so-called NB1 model. It has a variance function of + 1
or simply + . Since it has a linear form, it is called a linear negative
binomial; the traditional negative binomial is sometimes referred to as the
quadratic negative binomial because of the square exponent. In any case,
21
foremost use of the NBP model is to have it determine whether the data
prefer NB1 or NB2. After estimating the NBP model, if is close to 2, the
analyst should use NB2 rather than NB1. I suggest letting the model speak
for itself. If alpha is 0.5 and is 1.8, then that should be the reported model.
The NBP will be discussed in Chapter 5.
There are several other types of count models that are important in the analysts statistical toolbox. At times you will have data that have been truncated
or censored. We have already mentioned zero-truncated models. However, it
is possible that the data theoretically come from population data that cannot
have count values below 3, or perhaps above 10, or even to either side of two
counts (e.g., 7 to 10). If values are truncated at the low end of the counts, the
model is said to be left truncated; if they cannot exist higher than some cut
point, the model is right truncated. Interval truncation exists when counts
only exist between specific count values.
Censoring occurs where counts can possibly exist, but because of the study
design or other factors they are not observed for these data. Left, right, and
interval censoring can occur.
Finite mixture models are seldom used but can be exactly what you are
looking for in a model. What if counts from more than one source are occurring? In the probabilistic sense, what if counts are coming into the data you
are modeling from more than one data-generating mechanism? Perhaps 25%
of the counts in your data are distributed as Poisson with a specific mean
and the rest as Poisson with another mean value. A finite mixture model can
ferret out the percentage distributions inherent in count data and provide
means and coefficients/standard errors for each distributional component in
the data. This is currently an underutilized class of models that can allow an
analyst to have a much better understanding of various types of data situations than if they were modeled using standard Poisson or negative binomial
methods.
I mentioned at the outset that the majority of count models to be discussed
in this book are based on probability distributions. Nonparametric models,
which include models with smoothers applied to specific continuous data
in your model, can assist in fitting a model. Generalized additive models
(GAMs) are used to assess the linearity of continuous predictors with respect
to the response and provide information concerning what type of transform
is needed to effect linearity. GAMs are not usually employed as a model to be
used to predict or classify data.
Quantile count models are also nonparametric models but are used to
describe the empirical distribution underlying ones data. Quantile count
22
models are used when a parametric distribution, or mixture of distributions,

cannot be identified. This is a new class of count model, which may well enjoy
more popularity in the future. I discuss GAMs and quantile models briefly in
Chapter 9. See Hilbe (2011) for more on the subject. A thorough analysis of
GAMs for this class of models is given by Zuur (2012).
Finally, what happens if you have only a small amount of data or if your
data are highly unbalanced? For example, a five-observation data set is almost
always too small to appropriately model using standard asymptotic methods.
Or consider a ten-observation data set for which a single binary predictor
consists of nine 1s (90%) and one 0 (10%). The data are unbalanced. Or
suppose that we have a three-level categorical predictor in a model with 20
observations, where level 1 has 10 observations and level 2 has 8 observations,
leaving level 3 with only 2 observations. This is also an example of unbalanced
data. For such models, using standard estimation methods will very likely
fail to result in convergence, and if the model does converge, one or more
standard errors will very likely be inflated. Exact Poisson regression should
be attempted in such a situation.
Bayesian modeling is considered in the final chapter of the book. It is
appropriate when you wish to have constraints on a predictor or to provide
information about a predictor or predictors in a model in addition to the
information already available given the predictor. It is also useful when there
does not appear to be a PDF underlying the data to be modeled. Using
a Markov Chain Monte Carlo (MCMC) sampling algorithm, a well-fitted
empirical distribution can usually be found for which the user can obtain a
mean and standard deviation and 95% quantiles. These translate to a predictor
coefficient, standard error, and what is termed a credible interval.
There are other count models discussed in the literature, to be sure, but they
are not commonly used by analysts for research. On the other hand, I have
added several newer models to this book that I believe will become frequently
used in research because of the current availability of software support and on
account of their favorable properties. Some specialized models not addressed
in this book will be reviewed on the books web site.
1.4 ESTIMATION THE MODELING PROCESS

1.4.1 Software for Modeling
All but a very few of the count models discussed in this book are estimated
using two general methods: IRLS and full maximum likelihood estimation
23
(MLE). IRLS is an acronym meaning iteratively reweighted least squares,

which is the traditional method used to estimate statistical models from
the class of generalized linear models (GLMs). IRLS is in fact based on a
simplification of maximum likelihood that can occur when the models to be
estimated are members of the one-parameter exponential family of probability
distributions. This includes Poisson and negative binomial regressions, where
the negative binomial dispersion parameter is entered into the GLM algorithm
as a constant, as mentioned earlier in this chapter.
There are some situations where the parameters of a model cannot be
estimated using either IRLS or full maximum likelihood estimation, such
as mixed-effects models. Most applications use some variety of quadrature
to estimate mixed-effects models, although a number of analysts are beginning to employ Bayesian modeling techniques (Zuur, Hilbe, and Ieno 2013).
Mixed-effects models generally structure the data to be modeled in panels.
When modeling longitudinal data, for example, panels contain the observations made over time for each individual in the model. If patients are being
tested each year for five years, the data will have five observations for each
individual a panel. Since probability functions assume that each element
in the distribution is independent of the others, when data are structured
in panels it is clear that this assumption is violated. A number of models in
addition to mixed models exist for dealing with longitudinal panel models;
for example, generalized estimating equations (GEEs), which are estimated
using a variety of IRLS algorithm.
Bayesian models, discussed in the final chapter, use a sampling algorithm
referred to as Markov Chain Monte Carlo (MCMC) to develop a posterior
distribution of the data. There are a wide variety of MCMC type algorithms,
the two foremost being MetropolisHastings and Gibbs sampling. There are
a number of variations of these algorithms as well. We discuss this in more
detail in Section 9.8.
1.4.2 Maximum Likelihood Estimation4

Recall that we have characterized the goal of modeling to be the identification
of a probability distribution, or mixture of distributions, and estimation of
4
This section and Section 1.4.3 are optional and require a knowledge of basic
calculus. They are included for those who wish to obtain an overview of count
model estimation, but they are not required for reading the subsequent chapters. I
do suggest reading the first part of this section, though, to learn about calculating
Poisson probabilities.
24
its unknown parameter or parameters, which can be said to have generated

the population of data from which we are modeling a random sample. This
may not be how we actually think about the (frequency-based) modeling
process, but it is nevertheless its logic. A probability distribution is itself
defined in terms of the values of its parameter or parameters.
We may define a probability distribution function for count models as
f (y | , ) or
f (y; , )
(1.10)
where y is the count response, is the canonical location parameter or

link function, and is the scale parameter. Count models such as Poisson
regression set the scale to a value of one; other more complex count models
have a scale parameter, and in some cases more than one. The outcome
y, of course, has the distributional properties appropriate to the statistical
model used in estimation. Probability functions determine properties of the
response, as adjusted by explanatory predictors, and given values of the mean
and scale parameters.
A probability function generates or describes data on the basis of parameters. When we are actually modeling data, though, we know what the data
are. They have been collected for our study, or we use data that have been
previously published. In modeling, we seek the value of the probability distribution, as defined by specific unknown parameters, that makes the data we
have most likely. In order to do this, we in effect invert the relationship of
y and the PDF parameters, creating what is called a likelihood function. The
likelihood function can be defined as
L(, | y) or
L(, ; y)
(1.11)
We can clarify the difference between the probability and likelihood functions
as follows:
A probability function generates data on the basis of known parameters.
A likelihood function determines parameter values on the basis of known
data.
Given that we do know the data we are modeling, and given the fact that
we are attempting to estimate the parameters of the probability function
that (theoretically) generate the data we are modeling, we need to employ a
likelihood function in order to determine the parameters that make the model
data most likely to be the case. Expressed in another way, when modeling we
25
are asking what parameter values of a given PDF most likely generated the
data we have to model.
To make these concepts better understood, recall that the Poisson probability distribution has a single parameter and the negative binomial has two.
Each of these parameters can theoretically have an infinite number of parameter values. Once we select a Poisson probability, for example, to describe our
data, we need to refine the description by determining the location parameter.
We do this by maximizing, or optimizing, the Poisson likelihood function.
The method we use to maximize the likelihood function in question is referred
to as maximum likelihood estimation.
Because of numerical considerations, statisticians maximize the log of the
likelihood rather than the likelihood function itself. We will find throughout this book that the log-likelihood is one of the most well-used statistics
in modeling. Maximum likelihood estimation (MLE) is in fact maximum
log-likelihood estimation, although we rarely hear the term used in this
manner.
Maximization of the log-likelihood function involves taking the partial
derivatives of the function, setting the resulting equation to 0, and solving
for parameter values. The first derivative of the log-likelihood function, with
respect to the coefficients, is called the score function, U. The second derivative is a matrix called the Hessian matrix. The standard errors of the predictors
in the model are obtained by taking the square root of the diagonal terms of
the negative inverse Hessian, H1 . I refer you to Hilbe (2011) and Hilbe and
Robinson (2013), which provide an in-depth evaluation of both maximum
likelihood and IRLS methodology.
Before leaving this overview of maximum likelihood estimation, Ill give an
example of how this works, beginning with the Poisson probability distribution. It is the basic count model. If you understand the logic of estimation, it
will be easier to understand when and why things can go wrong in modeling.
In its simplest form, the Poisson probability distribution can be expressed
as
e i i i
yi !
y
f (y; ) =
(1.12)
where y represents a variable consisting of count values and is the expected

or predicted mean of the count variable y. y!, meaning y-factorial, is the product of counts up to a specific count value, y. f (y; ) indicates the probability
of y given or based on the value of the mean. The subscripts indicate that
26
the distribution describes each observation in the data. Technically, equation

(1.12) should have a product sign before the terms on the right side of the
equation, indicating that the function is the joint probability of the observations in the model being described by the function. The joint probability
can be represented as Pr(Obs1 and Obs2 and Obs3 and Obs-n). If
the observations are independent of one another, the joint probability may be
expressed as the product of the function across observations. Since we assume
that the observations being modeled using a Poisson probability distribution
are independent, the product sign is assumed but generally not displayed.
For an example of a simple Poisson model, suppose that we count the
number of customers waiting at the entrance for the bank to open. We do
this each morning for a week, including Saturdays. A more ambitious study
might be to count waiting customers for each day over a month, or even for
a six-month period. However, well evaluate the numbers for a single week.
To be specific, we count the number of customers waiting for service at the
time the bank opens:
Mon =
4;
Tue =
2; Wed =
0; Thu =
3; Fri =
1; Sat =
The mean number of counts over the six days is 2. If a Poisson probability
distribution with a mean, , of 2 truly describes this list or vector of counts,
we can calculate the probability of no (0) customers being in line, or any
other number of customers, using the Poisson probability function:
CUSTOMERS
Prob(0) :
. di
exp(-2) * (20)/0 = .13533528
. di exp(-2)* (20)/exp(lnfactorial(0))
.13533528
or simply
. di exp(-2)
.13533528
To calculate the probability of one person being in line and then two, three,
and four, we have
1 . di exp(-2)* (21)/exp(lnfactorial(1)) = .27067057
27
TABLE 1.4. R Poisson Probabilities for y from 0 through 4

y - c(4, 2, 0,3, 1, 2)
y0 - exp(-2)* (20)/factorial(0)
poisProb - c(y0, y1, y2, y3, y4); poisProb
[1] 0.13533528 0.27067057 0.27067057 0.18044704 0.09022352
# OR
dpois(0:4, lambda=2)
[1] 0.13533528 0.27067057 0.27067057 0.18044704 0.09022352
# CUMULATIVE
ppois(0:4, lambda=2)
[1] 0.1353353 0.4060058 0.6766764 0.8571235 0.9473470
# to plot a histogram
py - 0:4
plot(poisProb ~ py, xlim=c(0,4), type="o", main="Poisson Prob 0-4:
Mean=2")
Note: Statas poisson(mu,y) function provides a cumulative Poisson probability for a given mean and count term, y. poissonp(mu, y) gives a specific probability for a mean and y value; for example, for a mean and count (y)
of 2
. di poissonp(2,2)
.27067057
the cumulative values of y from 0 through 2,

. di poisson(2,2)
.67667642
In place of a constant value for the mean, mu, lets vary it, giving it four
different values:
mu = {0.5, 1, 3, 5}
Plotting the values allows us to observe the differences in the shapes of the
distributions. This type of graph will prove to be of use later when we discuss
28
.2
.4
.6
Poisson Distributions
mu0_5
mu3
10
mu1
mu5
FIGURE 1.3. Poisson distributions.
zero-truncated and zero-inflated models. The following code can be pasted

into the Stata doeditor and run, producing the graphic in Figure 1.3. The R
code for this figure is given in Table 1.5.
STATA CODE
clear
set obs 11
gen y = _n-1
gen mu = .
gen mu0_5 = (exp(-.5)* .5y)/exp(lngamma(y+1))
forvalues i = 1(2)6 {
gen mui = (exp(-i)*iy)/exp(lngamma(y+1))
}
graph twoway connected mu0_5 mu1 mu3 mu5 y, title("Poisson
Distributions")
Note that mean values under 1 are shaped like negative exponential distributions. The greater the mean, the more normal the shape of its appearance.
When we wish to adjust the values of the probability of customers waiting
by such factors as Is it raining or snowing?, Is it the first of the month
directly after customers may have been paid?, Is there an epidemic in the
29
TABLE 1.5. R Code for Figure 1.3

m- c(0.5,1,3,5)
#Poisson means
y- 0:11
layout(1)
for (i in 1:length(m)) {
#Observed counts
p- dpois(y, m[i])
#poisson pdf
if (i==1) {
plot(y, p, col=i, type=l, lty=i)
} else {
lines(y, p, col=i, lty=i)
}
}
area?, and so forth, it is necessary to construct a model based on discovering

what parameter value makes it most likely that this specific list of count
values occurred. This means that we reparameterize the Poisson PDF and log
both sides to derive the log-likelihood function.
The equation for the Poisson log-likelihood, showing summation across
the observations as discussed earlier, can be expressed as
L(; y) =
n
{yi ln(i ) i ln(yi !)}
(1.13)
i=1
Recall that the linear predictor of the Poisson model is xb, or x. Recall
also that x = ln(). This entails that = exp(x). exp(x) is called the
inverse link function, which defines . exp(x) also defines for the negative
binomial model, as well as for most models based on the Poisson and negative
binomial that are used in research. Because of this relationship, = exp(x)
is also referred to as the exponential mean function. If we substitute exp(x)
for (1.14) may be expressed as
L(; y) =
n
{yi (xi ) exp(xi ) ln (yi + 1)}
(1.14)
i=1
The first derivative of the preceding log-likelihood function with respect to

the coefficients (), which are also called the parameters when modeling,
provides the gradient, or score, of the Poisson log-likelihood:
(L(; y))
=
(yi exp(xi ))xi
i=1
n
(1.15)
30
TABLE 1.6. NewtonRaphson Maximum Likelihood Estimation

Initialize
# Provide initial or starting values for estimates
WHILE (ABS(n-o)tol & ABS( n- o)tol) {

g
= L/
# gradient: 1st derivative of log-likelihood wrt
H
= 2 L/2 # Hessian: 2nd derivative of log-likelihood wrt
o = n
n = o - H-1 g # updated maximum likelihood estimates
Lo = Ln
Ln
# new log-likelihood value
Setting equation (1.15) to zero (0) provides for the solution of the parameter
estimates.
The Hessian matrix is calculated as the second derivative of the loglikelihood function and is negative definite for . For the Poisson, it may
be expressed as
n

2 (L(; y))
=
(exp(xi ))xi xi

i=1
(1.16)
Estimation of the maximum likelihood variancecovariance matrix is based

on the negative inverse of the Hessian, often represented as (but not to be
understood as a sum symbol), given as
1
n

1

(exp(xi ))xi x j
(1.17)
= H =
i=1
The square roots of the respective terms on the diagonal of the negative inverse
Hessian are the values of predictor standard errors. A NewtonRaphson type
algorithm (see Table 1.6) can be used for the maximum likelihood estimation
of the parameters
r +1 = r H 1 g
(1.18)
which is the standard form of the maximum likelihood estimating equation.

The tools have now been developed to construct a full maximum likelihood Poisson algorithm. The algorithm typically updates estimates based on
the value of the log-likelihood function. When the difference between old
and updated values is less than a specified tolerance level usually 106
iteration stops and the values of the various statistics are at their maximum
31
likelihood estimated values. Other iteration criteria have been employed, but
all generally result in the same estimates. The scheme for maximum likelihood estimation follows. It is the basis for models being estimated using this
method. o indicates estimation at the old value of the parameters (coefficients); n is the new, updated value. Likewise for the likelihood, L. tol
indicates the level of tolerance needed for convergence, which is typically set
at 106 .
Refer to Section 2.4 for examples of both Stata and R maximum likelihood
code. Example code is provided for a Poisson regression estimated using
maximum likelihood. Real data are used for the no-frills Stata and R programs,
but model coefficients and associated statistical values are calculated and
displayed.
1.4.3 Generalized Linear Models and IRLS Estimation

Although the vast majority of models we discuss in this book are modeled
using the full maximum likelihood methods of estimation described in the
previous section, the two foremost count models Poisson and negative
binomial regression are often estimated as a generalized linear model. The
glm and glm.nb functions are the default method for estimating Poisson
and negative binomial models using R. Stata users may use the commands
poisson and nbreg for maximum likelihood estimation, or glm using
an IRLS algorithm. The SAS Genmod procedure for generalized linear models and several other GLM extensions is a maximum likelihood procedure
cast in an IRLS format. The Poisson and negative binomial models for SPSS
are available only in the Genlin procedure, a GLM algorithm. Limdep, an
econometric software package with extensive count-modeling capabilities,
does not use IRLS but rather MLE, quadrature, and simulation.
The Poisson distribution is a single-parameter member of the exponential
family of probability functions. The exponential family of distributions is
symbolized in a variety of ways. A standard formulation for one-parameter
models is expressed as
f (y; ) = exp{yi i b(i ) + c(yi )}
(1.19)
i is the canonical parameter or link function, defined as ln(mu) for the

Poisson and NB models. b( i ) is the cumulant. The first and second derivatives
of b( i ) define the mean and variance. c(y) is the normalization term, as given
in equation (1.10).
32
TABLE 1.7. The IRLS Fitting Algorithm

1. Initialize the expected response, , and the linear predictor, , or g().
2. Compute the weights as W1 = Vg()2 , where g() is the derivative of the
link function and V is the variance, defined as the second derivative of the
cumulant, b().
3. Compute a working response, a one-term Taylor linearization of the
log-likelihood function, with a standard form of (using no subscripts)
z = + (y )g().
4. Regress z on predictors X1 . . . Xn with weights W to obtain updates on the
vector of parameter estimates, .
5. Compute , or X, based on the regression estimates.
6. Compute , or E(y), as g1 ().
7. Compute the deviance or log-likelihood function.
8. Iterate until the change in deviance or log-likelihood between two iterations is
below a specified level of tolerance, or threshold.
Source: Hilbe (2007a).
Derivation of the iteratively reweighted least squares (IRLS) algorithm is

based on a modification of a two-term Taylor expansion of the log-likelihood
function where for count models y is a vector of count values and is the
parameter or parameters of the probability function generating y. The logic
of the IRLS estimating algorithm is given in Table 1.7, where
g() is the link function: for Poisson and NB, ln(mu)
g() is the derivative of the link, or 1/mu
g1 () is the inverse link function, exp(xb)
b() is mu, the mean
V is b(), the variance: Poisson: mu; NB: mu + *mu2 ; PIG: mu + *mu3
Deviance: Will be discussed in Chapter 3. See equations (3.1) and (3.2) and
related discussion. It is similar to a likelihood ratio test of the saturated
log-likelihood minus the model log-likelihood: D = 2{LLs LLm}.
The GLM IRLS algorithm for the general case is presented in Table 1.7.
The algorithm can be used for any member of the GLM family. The Poisson
model will be the subject of Chapter 2. I will provide example code for Poisson
regression using an IRLS algorithm. Both Stata and R examples are provided.
SAS code is in the Appendix.
1.5 Summary
33
1.5 SUMMARY
There are several important points to take from this chapter. The first point
we have made is that most analysts are aware that Poisson and negative
binomial regressions are used to model count response data, but they have
little knowledge of other count models or under what conditions they may
be desirable. They may have heard of overdispersion but not be fully aware
of what it is or how it relates to the Poisson model. We have emphasized,
however, that overdispersion is a very real problem for Poisson regression
and occurs when the variance of the Poisson model is greater than the mean.
Overdispersion also occurs more generally when there is more variability in
the model data than is assumed on the basis of the probability distribution
on which the model is based. Negative binomial regression, having a second parameter, is now a standard way of modeling overdispersed Poisson
data.
Negative binomial regression may not adequately adjust for the amount
of overdispersion in a Poisson model, depending on what gives rise to the
overdispersion or underdispersion. A number of other models based on the
Poisson and negative binomial models have been designed to appropriately
compensate for overdispersion.
Another important point to take from this opening chapter is that when
we are modeling data we are in fact modeling an underlying probability
distribution (PDF) or mixture of distributions. When modeling, the analyst
selects a PDF or mixture of PDFs that is believed to best describe the data to
be modeled. Once a selection is made, the analyst attempts to estimate the
parameters that make the data most likely to be the case. Analysts generally
do this using maximum likelihood estimation. IRLS estimation, which is the
algorithm typically used in generalized linear model (GLM) software, is a
variety of maximum likelihood. It is simplified because GLM models are
members of the single-parameter exponential family of distributions.
The data that are being modeled using maximum likelihood techniques are
also thought of as a random sample from a greater population of data, so the
model is in fact of a distribution that theoretically generates the population
data from which the model data are a random sample. Table 1.8 provides
a rough summary of these relationships. A summary of the relationship of
modeling to probability can be expressed as
The foremost goal of modeling is the identification of a probability distribution, or mixture of distributions, and estimation of its unknown
34
TABLE 1.8. The Modeling Process

1. Describe the response data. Be confident that the data being modeled are
theoretically a random sample from a greater population of data.
2. Select a probability distribution, or mixture of distributions, that you believe
best describes the data being modeled.
3. Model: Calculate unbiased estimates of the parameter(s) of the PDF that
makes your model data most likely. Include all relevant predictors.
4. Calculate the fitted or predicted values of the response based on the model.
5. Assess the differences between the estimated or fitted values and actual
values; i.e., test the closeness of y and values across all observations.
6. Evaluate fit test statistics; compare them with other models on the same data.
parameter or parameters, that can be said to have generated the population of data from which we are modeling a random sample.
This is not normally how we think of the modeling process, but based on the
predominant frequency-based interpretation of modeling, it makes sense. At
its core, it is consistent with the view that when modeling we are attempting
to discover the unbiased parameter values of a probability distribution, or
mixture of distributions, that make the data we are modeling most likely to
be the case. In the following chapter, we discuss in more detail how we make
this discovery.
CHAPTER 2
Poisson Regression

r How do Poisson models differ from traditional linear regression models?
r What are the distributional assumptions of the Poisson regression model?
For any count model?
r What is the dispersion statistic? How is it calculated?

r What is the relationship of Poisson standard errors to the dispersion
statistic?
r What is apparent overdisperson? How do we deal with it?

r How can a synthetic Monte Carlo Poisson model be developed?
r How are Poisson coefficients and rate-parameterized coefficients inter-
preted?
r What are marginal effects, partial effects, and discrete change with respect
to count models?
Poisson regression is fundamental to the modeling of count data. It was the
first model specifically used to model counts, and it still stands at the base
of the many types of count models available to analysts. However, it was
emphasized in the last chapter that because of the Poisson distributional
assumption of equidispersion, using a Poisson model on real study data is
usually unsatisfactory. It is sometimes possible to make adjustments to the
Poisson model that remedy the problem of under- or overdispersion, but
35
36
POISSON REGRESSION
unfortunately often this is not possible. In this chapter, which is central to

the book, we look at the nature of Poisson regression and provide guidelines
on how to construct, interpret, and evaluate Poisson models as to their fit.
The majority of fit tests we use for a Poisson model will be applicable to the
more advanced count models discussed later. This will also be true of how
we interpret count model coefficients and how predictions are produced.
We begin by providing a list of assumptions that Poisson models must
abide by in order to appropriately fit the data. This is followed by guidelines
on how an analyst can test to determine whether any of these assumptions
are violated in the data being modeled. The listing will be in summary form.
Typically such a summary is at the end of a chapter, but I am placing it at
the beginning to serve as a guideline for you to use when modeling and as a
notice of subsequent discussion in the chapter.
2.1 POISSON MODEL ASSUMPTIONS

When analysts have count data to model, they must first check the data to
see whether there are any major violations of the assumptions on which
the basic Poisson model is based (see Table 2.1). Poisson is the standard
count model, and the Poisson probability distribution function (PDF) is the
assumed manner in which we expect count data to be structured unless we
have reason to suspect otherwise. All other count models are adjustments or
variations from the basic Poisson model.
Each of these assumptions should be tested.
1. The response or dependent variable of a Poisson model must be a count. If
we wish to model a continuous variable, another model must be selected.
2. This criterion is often violated when a Poisson model is employed on a
count response term that does not include the possibility of having zero
counts (i.e., zero counts must be allowed as a possibility even though there
may not be any in a given modeling situation). For example, when dealing
with hospital outcomes data, patient length of stay (LOS) is often modeled.
But LOS values exclude zero days. As soon as a patient is admitted, LOS = 1.
That is, the range of LOS data is Y 1. A count term in a model that could
include zero counts but happens not to does not violate this criterion.
Each possible count in a Poisson distribution with a mean value of has
a specific probability of occurrence. The sum of these probabilities must be
2.1 Poisson Model Assumptions
37
TABLE 2.1. Basic Poisson Assumptions

1. The distribution is discrete with a single parameter, the mean, which is
usually symbolized as either (lambda) or (mu). The mean is also
understood as a rate parameter. It is the expected number of times that an
item or event occurs per unit of time, area, or volume.
2. The response terms, or y values, are nonnegative integers; i.e., the
distribution allows for the possibility of counts where Y 0.
3. Observations are independent of one another.
4. No cell of observed counts has substantially more or less than what is
expected based on the mean of the empirical distribution. For example, the
data should not have more zero counts than is expected based on a Poisson
distribution with a given mean. As the value of increases, the probability of
zero (0) counts is reduced.
5. The mean and variance of the model are identical, or at least nearly the same;
i.e., Poisson distributions with higher mean values have correspondingly
greater variability.
6. The Pearson Chi2 dispersion statistic has a value approximating 1.0. A value
of 1.0 results when the observed and predicted variances of the response are
the same.
one (1). However, if zero is excluded as a possibility, then the sum of probabilities will always be less than 1. In order to properly model the count data
having a low mean value, a zero-truncated Poisson distribution must be used
for modeling. We discuss this in more detail in Chapter 7.
3. Two ways in which independence may be tested are:
a. Check to determine whether the data are structured in panels (i.e., check
whether the data are clustered or are a collection of longitudinal data).
If they are, then they are not independent. When we model otherwise
panel data as though they are independent, we say that the data have
been pooled (i.e., we assume that the panel effect is not enough to
violate the independence criterion).
b. Check the difference between the model SEs and the SEs adjusted by
i. employing a robust sandwich estimator to the SEs, or
ii. bootstrapping the SEs
or
iii. checking SEs scaled by the dispersion statistic (i.e., model SEs multiplied by the square root of the Pearson Chi2 dispersion).
38
POISSON REGRESSION
If the SEs differ considerably, then the data are correlated. I suggest applying
all three adjustments to the model SEs. If all differ from the model SEs, it is
highly likely that the independence criterion has been violated.
4. This criterion may be tested by calculating the percentage of zeros in the
empirical distribution (i.e., the distribution of the count response variable).
Compare that with the frequency of zero counts expected or predicted
based on a Poisson PDF with the mean determined for the observed distribution. If the compared frequencies substantially differ, then a violation
exists in the distributional assumption. An example was given in Section
1.4.2, where we calculated the probability of six observations with count
values of 0 through 4. The mean of the six counts was calculated to be 2.
The probability of a 0 count for a Poisson distribution with a mean of 2 is
.135, or 13.5%. If we have a count variable with a mean of 2 but 25% of
the counts are 0, this criterion has been violated. It is generally permissible
to have small variations in the differences between actual and expected
counts, but it is usually wise to check using a Chi2 test, which is described
later in this chapter. The relationship of the probability of zero counts and
the value of will be explored in greater detail in Section 7.1, where we
discuss truncated zeros.
5. Calculate the mean and variance of the empirical (observed) count
response. Determine whether the two values differ.
6. The Pearson Chi2 test is performed as follows:
a. Tabulate the observed variance of the count variable being modeled.
Compare it with the predicted variance. If the two values differ, the
model is extradispersed. If the observed variance is greater than the
expected or predicted variance, the model is Poisson overdispersed;
if it is less, the model is Poisson underdispersed. Most count data are in
fact Poisson overdispersed.
b. Estimate the desired full Poisson model, checking the value of the
Pearson Chi2 dispersion. If the value of the dispersion varies from 1.0,
the model is Poisson extradispersed. A boundary likelihood ratio test
can be used to assess overdispersion. A generalized Poisson model can
test for the statistical significance of either under- or overdispersion.
When the preceding criteria are violated, the model generally appears as Poisson extradispersed and in particular as Poisson overdispersed. As such, the
criteria are all related to some degree, some more than others. An indication of
39
extradispersion, whether under- or over-, is given by the dispersion statistic,

as described in part 6b of the list.
If a model under consideration fails to violate any of the Poisson distributional assumptions, then we can model the data using a standard Poisson
model. If the data show evidence of extradispersion, we either must
1. employ an alternative count model that adjusts for the type of distributional
assumption violated in the data, or
2. if no clear distributional violation is apparent (e.g., no possibility of zero
counts, or excessive zero counts) and the dispersion still differs from
one (1), the model may in fact be only apparently extradispersed, as discussed later in the text. The researcher should check each of the alternative
reasons for extradispersion.
In Table 2.2, we summarize the steps to consider if a Poisson model appears
overdispersed.

It was mentioned in the previous section that a Poisson model may appear
to be overdispersed when the overdispersion is only apparent, not real. This
is a very important point to remember when modeling count data. Too often
an analyst will construct a complex negative binomial model only to later
discover that if they had perhaps made a simple amendment to the Poisson
model the overdispersion would have disappeared. Table 2.3 lists criteria for
apparent Poisson overdispersion.
If we are confident that Poisson model assumptions have been violated,
even after adjustments for possible apparent extradispersion, then we may
conclude that a given data situation is Poisson extradispersed. Note that data
may be Poisson overdispersed yet negative binomial equidispersed, or some
other variation. A model is overdispersed, for example, with respect to a given
distribution, not necessarily all distributions.
When a model is judged to be extradispersed, we first determine whether
it is under- or overdispersed. For a Poisson model, it is overdispersed, even
after adjustments for apparent overdispersion have been made, if the dispersion statistic is greater than 1 and is underdispersed if the dispersion is less
than 1.
40
POISSON REGRESSION
TABLE 2.2. First Steps to Take If the Poisson Model Appears

Overdispersed
Amend the model standard errors by (see Section 3.4 for details)
r multplying them by the square root of the Poisson dispersion statistic, defined as
(y )2 /;
r using a robust or sandwich variance estimator. The resulting standard errors are
also called robust or empirical standard errors. The model using robust standard
errors is at times referred to as a quasi-maximum likelihood model or as a
quasi-likelihood model;
r bootstrapping.
Employ an alternative count model that adjusts for the type of distributional
assumption violated in the data; e.g., use a:
r zero-truncated Poisson (ZTP) model if there is no possibility of 0 counts in the data;
r zero-inflated Poisson (ZIP) model if there are more 0 counts than are expected
based on the Poisson PDF for a given mean or 0 counts have a different source than
positive counts. Is there a theory as to why there are too many 0s?
r hurdle model if there are more, or fewer, 0 counts than are expected based on the
Poisson PDF for a given mean or 0 counts have a different source than positive
counts.
If 0 counts appear to have a different source than the positive counts, use:
r a truncated Poisson model if count values are not possible within the range of
counts;
r a censored Poisson if count values are not recorded for some reason within the
range of counts;
r negative binomial versions of the preceding solutions.
If overdispersion is evident from the dispersion statistic, but we have no clear idea
what is causing the overdispersion:
r check to determine if the model is only apparently overdispersed (discussed next);
r use a heterogeneous negative binomial to determine which predictors contribute to
the Poisson overdispersion (to be discussed later);
r use a negative binomial (NB2) model, checking its dispersion statistic to determine
if it under- or overadjusts for the extra dispersion in the Poisson model (to be
discussed: what happens if the NB model under- or overadjusts?);
r use a Poisson inverse Gaussian (PIG) model (or alternative count model; e.g.,
generalized Poisson), and compare the AIC and BIC tests with NB2. Use a model
with (substantially) lower AIC and BIC statistics. If there is no statistical
difference, use NB2 and then test (to be discussed).
41
TABLE 2.3. Criteria for Apparent Poisson Overdispersion

1.
2.
3.
4.
5.
The model omits important explanatory predictors.

The data include outliers.
The model fails to include a sufficient number of interaction terms.
A predictor needs to be transformed to another scale.
There are situations where the data are too sparse and more data need to be
collected and included in the model.
6. Missing values exist in the data but are not randomly distributed in the data;
i.e., they are not missing at random (MAR).
The next stage in the process of modeling counts is to determine, if possible,

the source of extradispersion. How one models largely depends on knowing
why the model is extradispersed, or at least what is the most likely reason.
We have already mentioned several reasons; for example, there may be far
too many zero counts in the data given the mean of the distribution. In such
a case, we may wish to attempt modeling the data using a group of models
called zero-inflated mixture models. These models mix a count model with a
separate model for the zero counts. This is typically a binomial logit model,
but need not be. It must be remembered also that there may be more than one
source of correlation in the data or more than one source of distributional
violation. Care must be taken to account for all sources of difficulty and not
only one. This can be a time-consuming procedure, but it is important if one
is attempting to properly model a given data situation.
2.3 CONSTRUCTING A TRUE POISSON MODEL

I believe that it is important to see exactly what a true Poisson model
looks like. We do this by creating a synthetic Poisson variable with specified
parameter values. Poisson model software will then be able to model the data
such that the model output reflects the Poisson variable we created. That is,
the coefficients of the model will be nearly the same as the parameter values
we gave the distribution. As a result, the dispersion statistic will have a value
approximating 1.0. Modeling the data in this manner makes it abundantly
clear how a statistical count model relates to a probability distribution that
theoretically generates the population data from which the model samples
but a random part.
42
POISSON REGRESSION
For our example model, we generate a random Poisson count response

variable adjusted by three explanatory predictors that are themselves generated by a uniform random number generator. We make each predictor into
uniformly distributed continuous variables, assigning them a specific coefficient or slope. This sort of exercise is important for testing the assumptions
of models, including model statistics.
We construct a data set with x1, x2, and x3 defined as random uniform
variables. The intercept will be assigned a value of 1. The coefficients we give
to the variables follow:
Intercept ==
X2
1.00
X1
== 0.75
== -1.25
X3
== 0.50
Stata code to create the simulated data consists of the following:

STATA CODE
. clear
. set obs 50000
. set seed 4590
. gen x1 = runiform()
. gen xb = 1 + 0.75*x1 - 1.25*x2 + .5*x3
. gen exb = exp(xb)
. gen py = rpoisson(exb)
. tab py
py |
Freq.
Percent
Cum.
------------+----------------------------------0 |
4,579
9.16
9.16
1 |
9,081
18.16
27.32
2 |
3 |
10,231
8,687
20.46
17.37
47.78
65.16
4 |
.
14 |
6,481
.
16
12.96
.
0.03
78.12
.
99.98
15 |
7
0.01
99.99
16 |
3
0.01
100.00
------------+----------------------------------Total |
50,000
100.00
43
The mean and median of the Poisson response are 3.0. The displayed output
has been amended:
. sum py, detail
50%
3
Mean
3.00764
. glm py x1 x2 x3, fam(poi) nolog
// non-numeric mid-header
Generalized linear models
Optimization
: ML
Deviance
54917.73016
Pearson
49942.18916
Log likelihood
= -93613.32814
output deleted
No. of obs
50000
Residual df
=
Scale parameter =
(1/df) Deviance =
49996
1
1.098442
(1/df) Pearson
AIC
BIC
= .9989237
= 3.744693
= -486027.9
-----------------------------------------------------------------------|
OIM
py |
Coef.
Std. Err.
z
P|z|
-------------+---------------------------------------------------------x1 |
.7502913 .0090475
82.93 0.000
.7325586
.768024
x2 | -1.240165 .0092747 -133.71 0.000
-1.258343 -1.221987
x3 |
.504346 .0089983
56.05 0.000
.4867096
.5219825
_cons |
.9957061
.00835
119.25 0.000
.9793404
1.012072
-----------------------------------------------------------------------. abic
AIC Statistic
3.744693
AIC*n
BIC Statistic
3.744755
BIC(Stata) = 187269.94
= 187234.66
We set a seed value of 4590, which I just provided by chance. Using this same
seed will guarantee that the same data and model is displayed. Dropping
the seed will result in each run giving slightly different output. If we ran a
Monte Carlo simulation of the data with perhaps 100 iterations, the parameter
estimates would equal the values we assigned them, and the Pearson dispersion statistic, defined as the Pearson statistic divided by the model degrees
of freedom, would equal 1.0. Note that the Pearson dispersion statistic in
the preceding model is 0.9989237, with the parameter estimates approximating the values we specified. Note also that the deviance-based dispersion
statistic is some 10% greater than 1. After hundreds of simulations, I have
found that simulations of a true Poisson model always result in a Pearson
dispersion statistic approximating 1. The deviance appears to vary between
1.03 and 1.13. I have also displayed a user command I wrote called abic,
which provides two types each of AIC (Akaike Information Criterion) and
44
POISSON REGRESSION
TABLE 2.4. R: Synthetic Poisson Model

library(MASS); library(COUNT); set.seed(4590); nobs - 50000
x1 - runif(nobs); x2 - runif(nobs); x3 - runif(nobs)
py - rpois(nobs, exp(1 + 0.75*x1 - 1.25*x2 + .5*x3))
cnt - table(py)
dataf - data.frame(prop.table(table(py) ) )
dataf$cumulative - cumsum(dataf$Freq)
datafall - data.frame(cnt, dataf$Freq*100, dataf$cumulative * 100)
datafall; summary(py)
summary(py1 - glm(py ~ x1 + x2 + x3, family=poisson))
confint.default(py1); py1$aic/(py1$df.null+1)
pr - resid(py1, type = "pearson")
pchi2 - sum(residuals(py1, type="pearson")2)
disp - pchi2/py1$df.residual; pchi2; disp
BIC (Bayesian Information Criterion) fit statistics. When comparing models

as to fit, lower values of either the AIC or BIC indicate a better fit. We discuss
both statistics in more depth later in the chapter.
Finally, it is clear that the coefficients we assigned to the random variates
are closely approximated using the Poisson model. The coefficients are nearly
identical to what we specified, the standard errors are tight, p-values are all
0.000, and the dispersion statistic is near 1.0. The model is a true Poisson
model.
R code and output follow for the same example. I have given the R code
(Table 2.4) the same apparent seed; realize, though, that the seed mechanisms
differ between the two software packages. The results will be similar but not
identical:
datafall
1
2
py
0
1
Freq dataf.Freq ...100 dataf.cumulative ...100

4667
9.334
9.334
9134
18.268
27.602
3
4
.
2
3
.
10190
8814
.
20.380
17.628
.
47.982
65.610
.
15
16
17
14
15
16
15
8
2
0.030
0.016
0.004
99.980
99.996
100.000
45
summary(py)
Min. 1st Qu.
0.000
1.000
Median
3.000
Mean 3rd Qu.

2.993
4.000
Max.
16.000
...
Coefficients:
Estimate Std. Error z value Pr(|z|)
(Intercept)
x1
x2
x3
---
0.985628
0.748436
-1.243313
0.518207
Null deviance: 84129

Residual deviance: 55154
AIC: 187059
confint.default(py1)
2.5 %
117.13
82.33
2e-16 ***
2e-16 ***
0.009298 -133.72
0.009018
57.46
2e-16 ***
2e-16 ***
0.008415
0.009091
on 49999
on 49996
degrees of freedom
degrees of freedom
# model confidence intervals

97.5 %
(Intercept) 0.9691352 1.0021199

x1
0.7306175 0.7662541
x2
-1.2615377 -1.2250893
x3
0.5005321
[1] 3.741183
#
0.5358818
load library msme and run " P__disp(py1)"

Pearson Chi2 and dispersion
pr - resid(py1, type = "pearson")
to obtain
# by-hand method
pchi2 - sum(residuals(py1, type="pearson")2)

disp - pchi2/py1$df.residual
pchi2; disp
[1] 49786.62
[1] 0.9958121
The model results are nearly the same, regardless of whether they are generated using Stata or R. Even with different seed values, the models are nearly
identical. Note that the same seeds for Stata and R models result in slightly
different values. The R dispersion statistic is 0.9958121.
To determine whether the single Poisson models we just ran are providing
values that approximate the parameter values we assigned to the algorithm,
we use what is called a Monte Carlo algorithm, in which no seed is provided
to the code so that each run is a bit different. (The Stata code is given in
Table 2.5, and the R code is provided in Table 2.6.) Here we execute the
46
POISSON REGRESSION
TABLE 2.5. Stata: Monte Carlo Poisson Code

program define poix_sim, rclass
/* poix_sim.ado */
version 10
drop _all
set obs 50000
gen x1 = runiform()
gen x2 = runiform()
gen x3= runiform()
gen py = rpoisson(exp(1 + 0.75*x1 - 1.25*x2 + .5*x3))
glm py x1 x2 x3, nolog fam(poi)
return scalar sx1 = _b[x1]
/// x1
return scalar sc = _b[_cons]
/// x2
/// x3
/// intercept
return scalar ddisp = e(dispers_s)

return scalar pdisp = e(dispers_p)
end
/// deviance dispersion

/// Pearson dispersion
run 500 times, keeping the values of the coefficients and both dispersion
statistics. At the conclusion, there are 500 observations of data in memory.
Obtaining the mean of the vector of mean values for each model statistic
provides us with the Monte Carlo results. The simulate command calls
and runs poix_sim:
. simulate mx1 = r(sx1)
mx2 = r(sx2) mx3 = r(sx3) mcon = r(sc)
mdd = r(ddisp) mpd = r(pdisp) , reps(500) : poix_sim

...
. sum
Variable |
Obs
Mean
Std. Dev.
Min
Max
-------------+-------------------------------------------------------mx1 |
500
.7499434
.0086789
.7273185
.7806724
mx2 |
500
-1.249551
.0089773 -1.275919 -1.223709
mx3 |
mcon |
mdd |
500
500
500
.4993433
1.00001
1.104367
.0091402
.0082247
.0066602
.4705572
.9790608
1.083313
.5229337
1.021834
1.124828
mpd |
500
1.00027
.006106
.9778052
1.020143
The Monte Carlo results demonstrate that we are modeling a true Poisson
model and that the dispersion statistic is 1.0. The deviance dispersion is 1.10,
47
some 10% greater than 1. The results for the value of the Pearson-based dispersion are identical for any true Poisson model we test using this method.
Monte Carlo results using R are similar to those for Stata. The dispersion
statistic is 0.9999323, nearly identical to 1. Coefficients are nearly correct to
the ten-thousandths place. If we had replicated the model 500 times as we
did for Stata instead of 100 times, our results would have been even closer:
TABLE 2.6. R: Monte Carlo Poisson Code
mysim - function()
{
nobs - 50000
x1 - runif(nobs)
x2 - runif(nobs)
x3 - runif(nobs)
py - rpois(nobs, exp(2 + .75*x1 - 1.25*x2 + .5*x3))
poi - glm(py ~ x1 + x2 + x3, family=poisson)
pr - sum(residuals(poi, type="pearson")2)
prdisp - pr/poi$df.residual
beta - poi$coef
list(beta,prdisp)
}
B - replicate(100, mysim())
apply(matrix(unlist(B[1,]),3,100),1,mean)
# Coefficients: intercept and x1, x2, x3

apply(matrix(unlist(B[1,]),4,100),1,mean)
[1] 1.9998512 0.7499429 -1.2497058 0.5000332
# Dispersion
mean(unlist(B[2,]))
[1] 0.9999323
Analysts use synthetic models for a number of reasons. We learned what a

true Poisson model looks like and learned which dispersion statistic to test
when checking for possible Poisson model overdispersion. In fact, many analysts still believe that the deviance dispersion is the appropriate test statistic to
assess overdispersion. But simulation studies, such as the Monte Carlo runs
we employed in this book, clearly demonstrate that the Pearson dispersion
statistic is 1.0 for a true Poisson, with greater values indicating overdispersion
48
POISSON REGRESSION
and lower values underdispersion. The deviance dispersion is biased, tending

to display more correlation in the data when there is none. Rs summary function, when used following glm, displays the deviance and residual degrees of
freedom.
2.4 POISSON REGRESSION: MODELING REAL DATA

I will use the well-known German national health registry data set for an
example of a Poisson regression. The data were collected for a number of
years beginning with 1984, which will be used for the example model. In
Stata, the data are saved as rwm1984. R users will have to install and load the
msme or COUNT (use capitals) package, then load the rwm5yr data, which
cover the years 19841988. Code will be given to create a data file named
rwm1984, which is a subset of rwm5yr.
The response, or dependent, variable is the number of visits made by
a patient to a physician (docvis) during the year. docvis is the count variable to be explained by other variables selected from the remainder of the
data. The selected variables are called explanatory predictors. Ill use outwork
(1 = patient not working; 0 = patient working) and age (2564) as the two
model predictors to explain docvis. As in the previous section, I follow model
estimation using the abic command, which is on the books web site. The
modelfit function in the COUNT package on CRAN provides the same
statistics.
As previously mentioned, knowing ones data is vital to the modeling process. This is particularly important when modeling count data. The response
variable is docvis. A partial output of a tabulation of the variable can be
displayed in Stata as follows:
STATA CODE
. use rwm1984
. tab docvis
MD |
visits/year |
Freq.
Percent
Cum.
------------+----------------------------------0 |
1,611
41.58
41.58
1 |
2 |
3 |
448
440
353
11.56
11.36
9.11
53.15
64.51
73.62
49
4 |
5 |
6 |
213
168
141
5.50
4.34
3.64
79.12
83.45
87.09
7 |
60
...
1.55
...
88.64
...
Notice the 41.58% zero (0) counts. With a mean of 3.163 and variance of
39.39 (variance = standard deviation squared), the variance far exceeds the
mean:
. sum docvis
Variable |
Obs
Mean
Std. Dev.
Min
Max
-------------+-------------------------------------------------------docvis |
3874
3.162881
6.275955
0
121
In addition, the expected number of zero (0) counts, based on a Poisson

distribution mean of 3.162881, is
. di exp(-3.162881)* (3.1628810)/exp(lnfactorial(0))
.04230369
We expect that only 4.23% of the observations in the model have a zero count,
but there are over 41% zero counts.
The model we are working with is seriously Poisson overdispersed. In fact,
it would be rather surprising if the data came from a Poisson distribution;
or alternatively, surprising if the data could be appropriately modeled using
Poisson regression.
The two other predictor variables we are using are outwork
. tab outwork
1=not |
working; |
0=working |
Freq.
Percent
Cum.
------------+----------------------------------0 |
2,454
63.35
63.35
1 |
1,420
36.65
100.00
------------+----------------------------------Total |
3,874
100.00
50
POISSON REGRESSION
and age
. sum age
Variable |
Obs
Mean
Std. Dev.
Min
Max
-------------+-------------------------------------------------------age |
3874
43.99587
11.2401
25
64
There is no problem with outwork, which is fairly balanced, but age is a

discrete variable consisting of integer values from 25 to 64 with a mean of
44. age is a predictor, presumably explaining, in part, if older ages tended to
result in a patient visiting the doctor more often during the year. Since age
. distinct age
|
Observations
Variable |
total
distinct
--------------+---------------------age |
3874
40
has 40 distinct values, and there is no reason to categorize it into separate

indicator variables, we enter it into the model as continuous. Most statisticians
will center a continuous predictor when it starts far from 0, as in this case.
We will do the same:
. center age, pre(c)
/* to also standardize age, type "stand" as added

option */
Centering is the process where the mean of the variable is subtracted from
every value of the variable. For example, centering provides that
age -- mean(age)
for each age in the model. Using the center command, we have named it
cage. It is important to remember that centering changes only the value of the
intercept in the model. All other predictor coefficients and standard errors,
and fit statistics, stay the same. We interpret age differently when centered,
though, as will be seen:
. glm docvis outwork cage, fam(poisson) nolog
Optimization
: ML
//
mid header deleted
No. of obs
=
Residual df
=
Scale parameter =
3874
3871
1
51
Deviance
Pearson
=
=
24190.35807
43909.61512
(1/df) Deviance =
(1/df) Pearson =
AIC
=
6.249124
11.34322 =
8.074027
Log likelihood
= -15636.39048
BIC
= -7792.0
-----------------------------------------------------------------------|
OIM
docvis |
Coef.
Std. Err.
z
P|z|
-----------+-----------------------------------------------------------outwork |
cage |
_cons |
.4079314
.0220842
.9380964
.0188447
.0008377
.0127571
21.65
26.36
73.54
0.000
0.000
0.000
.3709965
.0204423
.913093
.4448663
.0237261
.9630999
-----------------------------------------------------------------------. abic
AIC Statistic
=
8.074027
AIC*n
= 31278.781
BIC Statistic
8.07418
BIC(Stata) = 31297.566
Other predictors in the data could have been used in the preceding model
as well, but I selected a model with a single binary and single continuous
predictor to keep it simple.
Using the Stata glm command, the nolog option is used so that the iteration
log is not displayed. The intercept value .938 is the linear predictor of all
observations in the model when both outwork and age have values of 0. If age
were not centered, the intercept would have a value of .03351697.
It is of primary importance to notice that the Pearson-based dispersion
statistic has a value of 11.34, far higher than the ideal value for a Poisson model
of 1.0. I determined elsewhere that the model is not apparently overdispersed.
Adding an interaction, for example, or squaring the cage variable, and so forth,
did not result in an elimination of overdispersion. That would have solved
the issue upfront. Given the fact that
r there are excessive 0 counts in docvis given its mean,
r the variance of docvis far exceeds its mean, and
r the dispersion statistic (11.34) is much greater than 1,
it is not unwarranted to conclude that the model is truly overdispersed. The

predictors all have p-values of under 0.05, and thereby appear to significantly contribute to understanding (and predicting) docvis, but they do not.
The bias resulting from overdispersion especially such extreme overdispersion means that the p-values tell us nothing about the relationship
of the predictor and response. It is imperative that you remember this when
52
POISSON REGRESSION
TABLE 2.7. R: Example Poisson Model and Associated Statistics

library(COUNT)
data(rwm5yr); rwm1984 - subset(rwm5yr, year==1984)
cage - rwm1984$age - mean(rwm1984$age)
summary(poic glm(docvis ~ outwork + cage, family=poisson, data=rwm1984))
pr - sum(residuals(poic, type="pearson")2) # Pearson Chi2
pr/poic$df.residual
# dispersion statistic
modelfit(poic)
cnt - table(docvis)
dataf - data.frame(prop.table(table(docvis) ) )
dataf$cumulative - cumsum(dataf$Freq)
datafall - data.frame(cnt, dataf$Freq*100, dataf$cumulative * 100)
datafall
constructing and interpreting a model. An example Poisson model in R is

given in Table 2.7.
Perhaps we can develop a better-fitted model if we add more significant
predictors. I have heard many analysts claim that this is the case. However,
it is not. It may be the case that the true model includes certain additional
predictors (see Table 2.3) that were excluded from the model and when
included enhance the model fit, but it is also possible that added significant
predictors have little impact on the fit particularly when the model has been
misspecified and should be based on an alternative probability distribution
(e.g., negative binomial, PIG, or even a ZIP). It may also be the case that
including additional predictors does appear to provide a better fit but that the
appearance of better fit is merely superficial. Of course, the added predictors
may actually be required for a better fit. However, too many significant
predictors will tend to overfit the model (i.e., the model may fit the sample
data so well that it cannot be used to inform us about other data from the
overall population of data). The overfitted model is specific only to these
particular data. Also be cautious about not having too many predictors for
a given number of observations in the data. A common rule of thumb is
that there should be no less than a 10:1 ratio of observations to predictors.
Some authors have even argued that 20:1 or greater is preferable. A fairly
recent article demonstrated through simulation studies that for logistic and
Cox proportional hazards models, which are similar to Poisson models, a
more relaxed ratio is often feasible, depending on the structure of the data. A
53
5:1 ratio or smaller may at times produce a well-fitted model. See Vittinghoff
and McCulloch (2006) for details. We explore alternatives in subsequent
chapters.
Let us add additional predictors to our model and view the summary
statistics:
ADDED BINARY PREDICTORS: female, married, and kids
CATEORICAL PREDICTOR:
Educational level (edlevel)
category predictor.
--- a 4-
STATA CODE
. tab edlevel
Level of |
education |
Freq.
Percent
Cum.
------------+----------------------------------Not HS grad |
HS grad |
Coll/Univ |
3,152
203
289
81.36
5.24
7.46
81.36
86.60
94.06
Grad School |
230
5.94
100.00
------------+----------------------------------Total |
3,874
100.00
I initially used the term i.edlevel to tell Stata that edlevel is categorical, with
the first level as the default reference level, and therefore is excluded from
estimation. Displayed in Stata and R,
. glm docvis outwork cage female married kids i.edlevel, fam(poi) nolog
or
summary(tst1 - glm(docvis ~ outwork + cage + female + married + kids
+ factor(edlevel), family=poisson, data=rwm1984))
I found, however, that the second level was not significantly different from
the reference level (i.e., its p-value was substantially greater than 0.05). I
then generated four indicator or dummy variables, excluding both levels
1 and 2 from estimation. This means that a combination of levels 1 and 2 is
the reference level (patients who have not attended college or university). A
model can then be developed as
. tab edlevel, gen(edlevel)
// create indicator vars for each level

of edlevel
. glm docvis outwork cage female married kids edlevel3-edlevel4,

fam(poi) nolog
54
POISSON REGRESSION

Optimization
: ML
Deviance
Pearson
=
=
23894.1626
43855.49193
No. of obs
=
Residual df
=
Scale parameter =
3874
3866
1
(1/df) Deviance =
(1/df) Pearson =
AIC
=
6.18059
11.34389
8.000151
Log likelihood
= -15488.29274
BIC
= -8046.895
-----------------------------------------------------------------------|
OIM
docvis |
Coef.
Std. Err.
z
P|z| [95% Conf. Interval]
-----------+-----------------------------------------------------------outwork |
cage |
female |
.2725941
.0194905
.2596274
.0215047
.0009708
.0211399
12.68
20.08
12.28
0.000
0.000
0.000
.2304456
.0175878
.2181938
.3147426
.0213933
.3010609
married |
kids |
edlevel3 |
-.0937657
-.1247957
-.19083
.022653
.0222546
.0398098
-4.14
-5.61
-4.79
0.000
0.000
0.000
-.1381648
-.1684139
-.2688558
-.0493666
-.0811776
-.1128042
edlevel4 | -.2594583 .0480192

-5.40
0.000
-.3535742 -.1653424
_cons |
1.010466
.023941
42.21
0.000
.9635427
1.05739
-----------------------------------------------------------------------. abic
AIC Statistic
BIC Statistic
=
=
AIC*n
= 30992.586
BIC(Stata) = 31042.682
8.000151
8.004609
Alternatively, I can simply create a new categorical variable with a combined

first two levels from edlevel and remodel using a new three-level categorical
predictor that we define and relabel:
. gen elevel = edlevel
. recode elevel 2=1 3=2
4=3
. lab define elevel 1 "HS" 2 "Coll/Univ" 3 "Grad School"

. lab values elevel elevel
. tab elevel
elevel |
Freq.
Percent
Cum.
------------+----------------------------------HS |
Coll/Univ |
Grad School |
3,355
289
230
86.60
7.46
5.94
86.60
94.06
100.00
------------+----------------------------------Total |
3,874
100.00
. glm docvis outwork cage female married kids i.elevel, fam(poi) nolog
not displayed
55
TABLE 2.8. R: Change Levels in Categorical Predictor

levels(rwm1984$edlevel)
# levels of edlevel
elevel - rwm1984$edlevel
levels(elevel)[2] - "Not HS grad"
levels(elevel)[1] - "HS"
# new variable
# assign level 1 to 2
# rename level 1 to "HS"
levels(elevel)
# levels of elevel
summary(tst2 - glm(docvis ~ outwork + cage + female + married + kids
+ factor(elevel), family=poisson, data=rwm1984))
R code for creating elevel from edlevel is shown in Table 2.8:

levels(rwm1984$edlevel)
[1] "Not HS grad" "HS grad"
"Coll/Univ"
levels(elevel)
[1] "HS"
"Grad School"
"Coll/Univ"
"Grad School"
Its clear that even with five significant predictors added to the model, the
dispersion and AIC and BIC statistics are nearly identical to those of the
reduced model with outwork and cage as predictors. In such a case, Occams
razor maintains. Occams dictum in this context can be addressed as:
If two models have the same explanatory power,
the simpler model is preferred.
Prediction is one of the most important features of a statistical model. We
address it in Section 2.6 of this chapter.
2.5 INTERPRETING COEFFICIENTS AND RATE RATIOS

2.5.1 How to Interpret a Poisson Coefficient
and Associated Statistics
The Poisson model we constructed in the previous section appears not to fit
well. We speculated on what may have given rise to the overdispersion we
found in the model. It is clear that we must adjust it in order to discover
the best-fitted model for the data. What if the model was well fitted, though?
How should the preceding coefficients be interpreted? What about standard
56
POISSON REGRESSION
errors, and z-values? How do we interpret the statistics that are displayed in
Stata, R, and SAS output?
The coefficient j in general is the change in the log-count of the response
for a one-unit change in the predictor. For a binary predictor such as outwork,
is the change in the log-count value of the response when the value of the
predictor changes from 0 to 1. For a continuous predictor, the change with
respect to the predictor is from the lower of two contiguous values to the next
higher; for example, from age 45 to age 46. Note, though, that the change
in the response is in terms of log-values (i.e., log-physician visits), not the
original values of the response. When a continuous predictor is centered, the
reference is its mean value. When a centered variable is part of an interaction,
it helps to reduce correlation and is therefore in general desirable. Predictions
are not affected. A continuous variable may also be scaled, which entails that
the centered variable be standardized.
Lets take another look at the coefficient table for the German health data
we have been evaluating. This time, however, I will not center age but leave
it as it comes in the data as discrete values from 25 to 64. Stata allows the
user to display only the coefficient table by using the nohead option:
. glm docvis outwork age, fam(poi) nolog nohead
-----------------------------------------------------------------------|
OIM
docvis |
Coef.
Std. Err.
z
P|z|
-----------+-----------------------------------------------------------outwork | .4079314
.0188447
21.65
0.000
.3709965
.4448663
age | .0220842
.0008377
26.36
0.000
.0204423
.0237261
_cons | -.033517
.0391815
-0.86
0.392 -.1103113
.0432773
------------------------------------------------------------------------
Its obvious why most analysts prefer not to interpret Poisson coefficients.
Its rather difficult to decipher the import of a log-count. I provided two
alternative ways of expressing the generic meaning of the coefficient (see
Table 2.9), and other versions can be given as well, but they are all difficult
to comprehend or really visualize.
A coefficient provides a way of quantifying the relationship of the predictor
to the response based on the model. But its value is only as good as its statistical significance. It has become fairly standard to define .05 as the criterion
of statistical significance. In preliminary studies, this criterion is typically
relaxed, and in subjects like physics and nanotechnology the relationship is
57
TABLE 2.9. Interpretation of Poisson Coefficients

generic: The response has a log-count increase of for a one-unit increase in
the value of the predictor. Likewise, the response has a log-count
decrease of for a one-unit decrease in the value of the predictor.
Other predictors are held at their mean value.
outwork: Patients who are out of work increase the log-number of visits to a
physician by 0.4 compared with a patient who is working, holding age
at its mean.
age: For each one-year increase in age, there is an increase in the expected
log-count of visits to the doctor of .022, holding outwork at its mean.
tightened to .01 or even .001. But this is rare. For our purposes, well maintain
the generally accepted significance level of .05.
I provided the formula for the Poisson Hessian matrix in Chapter 1 and
mentioned that the standard errors of the model parameter estimates are
obtained as the square root of the diagonal terms of the inverse negative of
the Hessian. This can be simplified by having the software being used to
model data display the variancecovariance matrix of the model coefficients.
Thats the negative inverse Hessian.
Following estimation of a model, the variancecovariance matrix can be
obtained as
STATA CODE
. matrix list e(V)
symmetric e(V)[3,3]
docvis:
outwork
docvis:outwork
docvis:age
docvis:_cons
.00035512
-4.485e-06
.00003565
. di sqrt(.00035512)
docvis:
age
7.018e-07
-.00003104
//
docvis:
_cons
.00153519
standard error of outwork
.01884463
. di sqrt(7.018e-07)
.00083774
. di sqrt(.00153519)
.0391815
// standard error of age
//
standard error of the intercept
58
POISSON REGRESSION
The values we calculate match the standard errors displayed in the coefficient
table. These values are referred to as the model standard errors. We define and
use other types of standard errors later in this chapter.
A z-value is simply the ratio of the coefficient and associated standard
error. For the outwork predictor, we have
. di 0.4079314 /0.0188447
21.64701
The other coefficient/SEs are the same.

The p-value is based on the normal distribution. Since the intercept is
the only one of the three z-values having a p 0.00, Ill demonstrate its
calculation:
. di normal(-0.033517 / 0.0391815)*2
.39231357
Confidence intervals are based on the formula

j z/2 se( j )
(2.1)
where j is the coefficient of an individual predictor. z/2 is a quantile from

the normal distribution. For an of .05, z = 1.96. We can therefore calculate
the 95% confidence intervals of outwork as
. di .4079314 .37099579
1.96* .0188447
//
lower confidence interval
. di .4079314 +
.44486701
1.96* .0188447
//
upper confidence interval
which perfectly matches the coefficient table confidence intervals.

For models with few observations and models with unbalanced data, coefficients generally fail to approach normality, which is assumed when using
standard methods. In fact, many coefficients are not distributed normally,
particularly those that are not statistically significant. Many analysts prefer to model the standard errors using a likelihood-based method. The
default calculation for confidence intervals using Rs glm function is the use
of likelihood-based standard errors that are obtained using the confint
59
function. Statas pllf command provides likelihood profiling of standard

errors. Only continuous predictors are subject to likelihood profiling:
R CODE
summary(pyq - glm(docvis ~ outwork + age, family=poisson,
data=rwm1984))
# Likelihood Profiling of SE
confint(pyq)
Waiting for profiling to be done ...
2.5 %
97.5 %
(Intercept) -0.1105313 0.04305984
outwork
0.3709909 0.44486231
age
0.0204444 0.02372828
# Traditional Model-based SE
confint.default(pyq)
2.5 %
97.5 %
(Intercept) -0.11031129 0.04327726

outwork
0.37099654 0.44486632
age
0.02044229 0.02372611
The standard errors differ little in this likelihood profiling, but this is not
always the case. Profiling may mean the difference between accepting or
rejecting a predictor. In general, standard errors based on profile likelihood
are preferable to traditional model-based standard errors. We will later find
that determining the significance of a predictor by means of a likelihood
ratio test is usually preferable to the traditional model-based method. In
addition, I will suggest using another type of adjustment to model-based
standard errors the use of robust or sandwich variance estimators (refer to
Section 3.4.3).
2.5.2 Rate Ratios and Probability

In order to have a change in predictor value reflect a change in actual visits
to a physician, we must exponentiate the coefficient e j . Using Statas glm
command, the eform option exponentiates the coefficients and confidence
intervals of the coefficients. The standard error is calculated using the delta
60
POISSON REGRESSION
method, which in this case amounts to exp()*SE , where the second term is
the standard error of the original standard model. First, we exponentiate the
coefficients:
STATA CODE
# exponentiated coefficient: rate ratio outwork
. di
exp( _b[outwork])
1.5037041
# exponentiated coefficient: rate ratio age
. di
exp( _b[age])
1.0223299
* Delta Method: SE outwork rate ratio
. di
exp( _b[outwork]) * _se[outwork]
.02833683
* Delta Method: SE age rate ratio
. di
exp( _b[age]) * _se[age]
.00085643
The calculations may be verified by displaying the table of incidence rate

ratios:
. glm docvis outwork age, fam(poi) nolog nohead eform
-----------------------------------------------------------------------|
OIM
docvis |
IRR
Std. Err.
z
P|z|
-----------+-----------------------------------------------------------outwork | 1.503704
.0283368
21.65
0.000
1.449178
1.560282
age |
1.02233
.0008564
26.36
0.000
1.020653
1.02401
_cons | .9670385
.03789
-0.86
0.392
.8955553
1.044227
------------------------------------------------------------------------
The header statistics of the exponentiated model are identical to the standard
table of coefficients. Using R, we can obtain exponentiated coefficients by
running exp(coef(poi1)).
The incidence rate ratio (IRR) indicates the ratio of the rate of counts
between two ascending contiguous levels of the response. For this example,
we interpret the IRRs for each predictor as in Table 2.10.
61
TABLE 2.10. Interpretation of Rate Ratios

Patients who were out of work in 1984 had one-and-a-half times more visits to
a physician during 1984 than patients who were working. Age is held
constant.
Patients visited a physician some 2.2% more often with each year older in age.
If age is centered, the result will be interpreted as such.
For each year difference from the mean of age, there is an associated 2.2% decrease
or increase in the mean number of physician visits made by German patients in
1984. Outwork is held constant.
Other ways of expressing the same thing as in the table may also be given.
In particular, rate ratios can be expressed as probabilities or likelihoods in
the sense that we can also interpret outwork as
Out-of-work patients were some one-and-a-half times more likely (or
more probable) to visit a physician in 1984 than were working patients.
If we think of our data as a random sample from a greater population of
data that can be described (or was generated) by a distribution with specific
unknown parameters, it is possible to interpret outwork as:
Out-of-work patients are about one-and-a-half times more likely to
visit a doctor than are working patients;
or
Those with a job see a doctor half as much as those who are out of
work.
For the predictor age, we can express the rate ratio as:
For each year older, Germans are likely to see a doctor some two-anda-half percent more often.
Most analysts prefer to exponentiate coefficients and interpret parameter
estimates as rate ratios. Always remember, though, that such an interpretation
always includes a comparison of two levels of a predictor. For a binary
62
POISSON REGRESSION
TABLE 2.11. R: Poisson Model Rate Ratio Parameterization

library(COUNT)
summary(poi1 - glm(docvis ~ outwork + age, family=poisson,
data=rwm1984))
pr - sum(residuals(poi1, type="pearson")2) # Pearson Chi2
pr/poi1$df.residual
poi1$aic / (poi1$df.null+1)
# AIC/n
exp(coef(poi1))
# IRR
exp(coef(poi1))*sqrt(diag(vcov(poi1))) # delta method
exp(confint.default(poi1))
# CI of IRR
variable, the ratio is between x = 1 and x = 0. For categorical variables, the

ratio is between the level of interest and the reference level. For continuous
variables, it is the ratio of the higher value of the variable to the value of the
variable at the next lowest level (e.g., age 45 to 44).
Note that the preceding Poisson model may also be estimated using Statas
poisson command. It uses full MLE to obtain model results, which are the
same as what is produced using glm. R has MLE versions of Poisson regression using the COUNT, msme, and gamlss packages, among others. To
display the available functions in the COUNT package (or other packages),
use the command
ls("package:COUNT")
Using R, we may obtain the same results by running the code in Table 2.11
in the R script editor.
2.6 EXPOSURE: MODELING OVER TIME, AREA, AND SPACE

The basic Poisson distribution assumes that each count in the distribution
occurs over a small interval of time. However, we often count events over a
period of time or over various areas. In fact, this is what we mean by a rate
a count of events within a given time period, area, or volume. With respect to
time, we may want to count how many events occur each day over a period of
a month, or over any period of time; for example, how many distinct sunspots
were counted each year over a 20-year or longer period or how many sales of
63
a particular type of product occur each month over the course of a year. The
rate of counts, , is calculated as the number of events counted divided by
the period of time that counting occurs, and likewise for counts per area. We
may count 10 events occurring in area A and only 7 in area B, but if area A
is half the size of area B, the rate of counts of events is greater in area B. The
same is the case for volumes of space: how many supernovae are counted in
an area of 100 cubic light-years in our Milky Way galaxy. We may have to
adjust over both time and area, or time and volume, but most studies do not
entail such a double adjustment.
Statisticians use an offset with a model to adjust for counts of events
over time periods, areas, and volumes. The model is sometimes referred
to as a proportional intensity model.
We briefly addressed the rate parameterization of the Poisson model in
Chapter 1. Although is sometimes said to be an intensity or rate parameter,
it is such only when thought of in conjunction with a constant coefficient, t.
The rate parameterization of the Poisson PDF can be expressed as
e t (t) y
(2.2)
f (y; ) =
y!
where t represents the length of time, or exposure, during which events or
counts uniformly occur. t can also be thought of as an area or volume in which
events uniformly occur, each associated with a specific count. For instance,
when using a Poisson model with disease data, t* can be considered the rate
of disease incidence in specified geographic areas, each of which may differ
from other areas in population. Likewise, the incidence rate of hospitalized
bacterial pneumonia patients can be compared across counties within the
state. A count of such hospitalizations divided by the population size of
the county, or by the number of total hospitalizations for all diseases, results
in the incidence rate ratio (IRR) for that county. When t = 1, the model is
understood to apply to individual counts without a consideration of size.
Technically, basic Poisson distribution assumes that each count in the distribution occurs over a small interval of time so small that it consists of a
single count. Size or period is not a consideration. If the periods, areas, or
volumes in which events occur are the same for the entire study, an offset
is not needed. On the other hand, where unequal periods of time, area, or
volume (TAV) occur in the model, an offset must be given. The key notion
is that events can be considered as entering or being in an area or period of
time independently of other events. They are uniformly distributed in each t.
64
POISSON REGRESSION
TABLE 2.12. R: Poisson with Exposure

data(fasttrakg)
summary(fast - glm(die ~ anterior + hcabg + factor(killip),
family=poisson,
offset=log(cases),
data=fasttrakg))
exp(coef(fast))
exp(coef(fast))*sqrt(diag(vcov(fast)))
exp(confint.default(fast))
modelfit(fast)
Many commercial software applications indicate exponentiated Poisson

coefficients as incidence rate ratios by using the acronym IRR. IRR is also
used with exponentiated negative binomial and PIG coefficients.
When employing a rate parameter over TAV to a Poisson model, analysts
enter the natural log of t as an offset into the estimating algorithm. The fitted
value is expressed as
= exp(x + log(t))
(2.3)
which is the same as

exp(x) =
,
t
= t exp(x)
(2.4)
log(t) is entered into the estimating algorithm as a constant.

An example of a rate-parameterized Poisson model is provided. The data are
from the Canadian National Cardiovascular Disease registry called FASTRAK.
They have been grouped by covariate patterns from individual observations.
The response is die, which is a count of the number of deaths of patients
having a specific pattern of predictors. Predictors are anterior, which indicates
if the patient has had a previous anterior myocardial infarction; hcabg, if the
patient has a history of having had a CABG (coronary artery bypass grafting)
procedure; and killip class, a summary indicator of the cardiovascular health
of the patient, with increasing values indicating increased disability. The
number of observations sharing the same pattern of covariates is recorded in
the variable case. This value is log-transformed and entered into the model
as an offset. In Stata, the offset is specified as an option by using either
the lnoffset or exposure options, both of which automatically log the offset
65
TABLE 2.13. R: Interpretation of Poisson Exposure Model

Patients having an anterior site heart attack are twice as likely to die than if the
damage was to another area of the heart.
Patients with a history of having a CABG procedure are twice as likely to die than if
they did not have such a procedure.
Patients having a killip 2 status are two-and-a-half times more likely to die than if
they have level 1 killip level status (no perceived problem). Those at level 3 are
3 times more likely to die, and those at level 4, which is experiencing a massive
heart attack, are 12 times more likely to die than those with no apparent heart
problems.
variable before entering it into the estimation algorithm. Stata developers

now prefer exposure instead of lnoffset.
The data are in fasttrakg and are given in the following display. Since
the data are grouped, they are easier to observe as a whole. The R fasttrakg
data file is in the COUNT package (see Table 2.12 for R code for Poisson
exposure; see Table 2.13 for R interpretation of a Poisson exposure model).
STATA CODE
. use fasttrakg,clear
. l, nolab
// list of numeric values for each observation and predictor
+-----------------------------------------------------------------+
| die
cases
anterior
hcabg
killip
kk1
kk2
kk3
kk4 |
|-----------------------------------------------------------------|
1. |
5
19
0
0
4
0
0
0
1 |
2. | 10
83
0
0
3
0
0
1
0 |
3. | 15
412
0
0
2
0
1
0
0 |
4. | 28
1864
0
0
1
1
0
0
0 |
5. |
1
1
0
1
4
0
0
0
1 |
|-----------------------------------------------------------------|
6. |
0
3
0
1
3
0
0
1
0 |
7. |
1
18
0
1
2
0
1
0
0 |
8. |
2
70
0
1
1
1
0
0
0 |
9. | 10
28
1
0
4
0
0
0
1 |
10. |
9
139
1
0
3
0
0
1
0 |
|-----------------------------------------------------------------|
11. | 39
443
1
0
2
0
1
0
0 |
12. | 50
1374
1
0
1
1
0
0
0 |
13. |
1
6
1
1
3
0
0
1
0 |
14. |
3
16
1
1
2
0
1
0
0 |
15. |
2
27
1
1
1
1
0
0
0 |
+-----------------------------------------------------------------+
66
POISSON REGRESSION
. glm die anterior hcabg kk2-kk4, nolog fam(poi) eform exposure(cases)

No. of obs
15
Optimization
: ML
Deviance
10.93195914
Residual df
Scale parameter
(1/df) Deviance
=
=
=
9
1
1.214662
Pearson
12.60791065
(1/df) Pearson
AIC
=
=
1.400879
4.93278
Log likelihood
= -30.99584752
BIC
= -13.44049
-----------------------------------------------------------------------|
OIM
die |
IRR
Std. Err.
z
P|z|
-----------+-----------------------------------------------------------anterior | 1.963766
.3133595
4.23
0.000
1.436359
2.684828
hcabg |
kk2 |
kk3 |
1.937465
2.464633
3.044349
kk4 |
_cons |
ln(cases) |
12.33746
.0170813
1
.6329708
.4247842
.7651196
2.02
5.23
4.43
0.043
0.000
0.000
1.021282
1.75811
1.86023
3.675546
3.455083
4.982213
3.384215
9.16
.0024923 -27.89
(exposure)
0.000
0.000
7.206717
.0128329
21.12096
.0227362
-----------------------------------------------------------------------. abic
AIC Statistic
=
4.93278
AIC*n
= 73.991692
BIC Statistic
5.566187
BIC(Stata) = 78.239998
The dispersion at first may appear as relatively low at 1.40, but given a total
observation base of 5388, the added 40% overdispersion may represent a lack
of model fit. We delay this discussion until later in this chapter.
2.7 PREDICTION
We have previously described how predicted Poisson probabilities may be
generated. However, one of the foremost uses of prediction rests with the
ability of predicting expected counts based on predictor values. The values
do not have to be the same as those that actually were used to estimate the
model parameters. For example, using the German health data example, we
67
2.7 Prediction
may calculate the expected number of doctor visits for a working 50-year-old
patient based on the table of coefficient values displayed as
glm docvis outwork age, nolog fam(poi) nohead
-----------------------------------------------------------------------|
OIM
docvis |
Coef.
Std. Err.
z
P|z|
-----------+-----------------------------------------------------------outwork |
age |
_cons |
.4079314
.0220842
-.033517
.0188447
.0008377
.0391815
21.65
26.36
-0.86
0.000
0.000
0.392
.3709965
.0204423
-.1103113
.4448663
.0237261
.0432773
------------------------------------------------------------------------
Given that a working patient has an outwork value of 0 and coefficient values
are signified as _b[ ], we may obtain the linear predictor for a 50-year-old
working patient as
. di _b[outwork]*0 + _b[age]*50 - .033517
1.0706929
The expected count is calculated by exponentiating the Poisson linear

predictor:
. di exp(1.0706929)
2.9174003
Therefore, on the basis of the model, we expect or predict that a 50-year-old

working German patient visited a doctor three times during 1984. If we had
more predictors, or a better-fitting model, we would be more certain that our
prediction was correct. As it is, we have previously demonstrated that the
model is rather severely overdispersed.
Predicted counts and their 95% confidence interval may be obtained from:
STATA
#delimit ;
poisson docvis outwork age ; predict mu ; predict eta, xb ;
predict se_eta, stdp ; gen low = eta - invnormal(0.975) * se_eta ;
gen up = eta + invnormal(0.975) * se_eta ; gen lci = exp(low);
gen uci = exp(up) ; sort mu;
twoway (line lci mu uci eta, lpattern( dash 1 dash 1)),
ytitle("Predicted Count and
95% CI"); #delimit cr
68
POISSON REGRESSION
R
myglm - glm(docvis ~ outwork + age, family=poisson, data=rwm1984)
lpred - predict(myglm, newdata=rwm1984, type="link", se.fit=TRUE
up - lpred + 1.96*lpred$se.fit); lo - lpred - 1.96*lprd$se.fit)
eta - lpred$fit ; mu - myglm$family$linkinv(eta)
upci - myglm$family$link(up); loci - myglm$family$link(lo)
In the next chapter, we extend the analysis of predictions to making comparisons between observed and predicted, or expected, counts.
2.8 POISSON MARGINAL EFFECTS

Marginal effects are used now by most econometricians. In fact, some in this
area believe that marginal effects should be reported in place of coefficients
for models such as Poisson and negative binomial regression. They are also
used for the other models we discuss in this book. What are they?
r Marginal effects pertain only to continuous predictors.
r Discrete change or partial effects are used for binary and categorical pre-
dictors.
I believe that these statistical methods are important to research in other
disciplines as well, so it is wise to be aware of what they do.
A marginal effect relates a continuous predictor to the predicted probability
of the response variable. Other predictors in the model are held at their mean,
TABLE 2.14. R: Marginal Effects at Mean
==============================================
library(COUNT)
summary(pmem - glm(docvis ~ outwork + age, family=poisson,
data=rwm1984))
mout - mean(rwm1984$outwork); mage - mean(rwm1984$age)
xb - coef(pmem)[1] + coef(pmem)[2]*mout + coef(pmem)[3]*mage
dfdxb - exp(xb) * coef(pmem)[3]
mean(dfdxb)
==============================================
mean(dfdxb)
[1] 0.06552846
69
or sometimes median, values. The basic interpretation of marginal effects

relates to
how the probability of the count response changes with a one-unit
change in the value of the continuous predictor.
We discuss two types of marginal effects:
r the marginal effect taken at the mean value of the predictor and
r the average marginal effect taken at the mean of the predicted counts.
2.8.1 Marginal Effect at the Mean

For count models in general, and in particular Poisson and negative binomial
models, the marginal effect at the mean is defined as
MEmean = exp(xi k )k
Using our rwm1984 data, we calculate the marginal effect of age, holding
outwork at its mean:
STATA CODE
. margins, dydx(age) atmeans
Conditional marginal effects
Number of obs
Model VCE
: OIM
Expression
: Predicted mean docvis, predict()
dy/dx w.r.t. : age

at
: outwork
3874
.3665462 (mean)
age
=
43.99587 (mean)
-----------------------------------------------------------------------|
Delta-method
|
dy/dx
Std. Err.
z
P|z|
-----------+-----------------------------------------------------------age | .0655285
.0024232
27.04
0.000
.060779
.0702779
------------------------------------------------------------------------
The marginal effect of age, .0655, may be understood to mean:

The number of visits made to a doctor increases by 6.6% for each year
of age, when outwork is set at its mean value.
70
POISSON REGRESSION
Or:
At the average of age, an extra year of age is associated with a 0.066
increase in doctor visits per year when outwork is set at its mean value.
There is no standard R function yet that calculates marginal effects at the
mean, or average marginal effects. We must therefore write R script to determine the results (see Table 2.14).
mean(dfdxb)
[1] 0.06552846
This is the same value obtained using the Stata margins command.
2.8.2 Average Marginal Effects

Average marginal effects are defined as
k y
Using Stata, we may calculate them as
STATA CODE
. margins, dydx(age)
Average marginal effects
Model VCE
Number of obs
3874
: OIM
Expression
dy/dx w.r.t. : age
-----------------------------------------------------------------------|
Delta-method
|
dy/dx
Std. Err.
z
P|z|
----+------------------------------------------------------------------age |
.0698497
.0027237
25.64
0.000
.0645113
.0751881
------------------------------------------------------------------------
The above-average marginal effects tell us that there are on average

0.07 more doctor visits given each additional year of patient age, with
outwork at its mean value.
Or:
For each additional year of age, there are on average 0.07 additional
doctor visits, with outwork at its mean value.
71
Using R, we need to execute the following code. Note that the calculated
statistic is identical to what we calculated using the margins command:
R CODE
mean(rwm1984$docvis) * coef(pmem)[3]
age
0.06984968
2.8.3 Discrete Change or Partial Effects

Discrete change is used to evaluate the change in predicted probability of the
response when a binary predictor changes values from 0 to 1.
To determine the partial effects for outwork, the predictor in Stata must
specifically be made a factor variable. Following the modeling of the data
not displayed because the quietly option is used the margins command
can be used to obtain the correct effect. To reiterate, for a discrete change, the
binary or categorical predictor must be specifically factored in the regression:
STATA CODE
. qui glm docvis i.outwork age,
fam(poi)
. margins, dydx(outwork) atmean

Conditional marginal effects
Model VCE
: OIM
Number of obs
3874
Expression
dy/dx w.r.t. : 1.outwork
at
: 0.outwork
1.outwork
age
=
=
=
.6334538 (mean)
.3665462 (mean)
43.99587 (mean)
-----------------------------------------------------------------------|
Delta-method
|
dy/dx
Std. Err.
z
P|z|
--------+--------------------------------------------------------------1.outwork | 1.287021 .0625526
20.58
0.000
1.16442
1.409622
-----------------------------------------------------------------------Note: dy/dx for factor levels is the discrete change from the base level.
R CODE
data=rwm1984))
mu0 - exp(pmem$coef[1] + pmem$coef[3]*mage)
72
POISSON REGRESSION
mu1 - exp(pmem$coef[1] + pmem$coef[2] + pmem$coef[3]*mage)

pe - mu1 - mu0
mean(pe)
[1] 1.287021
Average partial effects or discrete change uses the same method as for average
marginal effects, except for the factoring of outwork:
STATA CODE
. margins, dydx(outwork)
Average marginal effects
Number of obs
3874
Model VCE
: OIM
Expression
dy/dx w.r.t. : 1.outwork
-----------------------------------------------------------------------|
Delta-method
|
dy/dx
Std. Err.
z
P|z|
----------+------------------------------------------------------------1.outwork | 1.327171
.0635453
20.89
0.000
1.202624
1.451718
-----------------------------------------------------------------------Note: dy/dx for factor levels is the discrete change from the base level.
R CODE
data=rwm1984))
bout = coef(pmem)[2]
mu = fitted.values(pmem)
xb = pmem$linear.predictors
pe_out = 0
pe_out = ifelse(rwm1984$outwork == 0, exp(xb + bout)-exp(xb), NA)
pe_out = ifelse(rwm1984$outwork == 1, exp(xb)-exp(xb-bout),pe_out)
mean(pe_out)
[1] 1.327171
There are several other ways to relate predictors and the response; for example, as elasticities and semielasticities. If you intend to use marginal effects
with your modeling project, I suggest you check the possibility of parameterizing the relationship of continuous predictors to the response as elasticities
or even semielasticities. See Hilbe (2011) for a more extensive analysis of
marginal and partial effects, and alternative statistics.
2.9 Summary
73
2.9 SUMMARY
We have covered quite a bit of statistical material in this chapter, starting
from the distributional assumptions on which the Poisson model is based
and then identifying and testing for apparent overdispersion as distinct from
real overdispersion. We then discussed constructing and interpreting Poisson
models. A true synthetic Poisson model was created, identifying aspects of
the model output that characterize well-fitted models. This discussion was
followed by modeling a poorly fitted real-data Poisson model, also evaluating its characteristics. Finally, we explained the meaning of two varieties of
marginal and partial effects and described how they are created as well as
how they are interpreted.
A Poisson model is usually a good place to start when modeling count
data, which may have a number of explanatory predictors. The following
chapter expands on the meaning of overdispersion and testing for it. We also
address standard fit tests as they relate to count models. By the conclusion of
the chapter, you should have a good understanding of the basics of modeling
count data. What will remain are models that have been designed to adjust for
specific types of extradispersion; for instance, negative binomial regression,
Poisson inverse Gaussian regression, and so forth.
CHAPTER 3
Testing Overdispersion

r How is overdisperion recognized?
r What are some of the foremost tests to determine whether a Poisson model
is overdispersed?
r What is scaling? What does it do to a count model?

r Why should robust standard errors be used as a default?
r What is a quasi-likelihood model?
This chapter can be considered a continuation of Chapter 2. Few real-life

Poisson data sets are truly equidispersed. Overdispersion to some degree is
inherent in the vast majority of Poisson data. Thus, the real question deals
with the amount of overdispersion in a particular model is it statistically
sufficient to require a model other than Poisson? This is one of the foremost
questions we address in this chapter, together with how we assess fit and then
adjust for the lack of it.
3.1 BASICS OF COUNT MODEL FIT STATISTICS

Most statisticians consider overdispersion the key problem when considering
count model fit. That is, when thinking of the fit of a count model, an analyst
74
75
typically attempts to evaluate whether a count model is extradispersed

which usually means overdispersed. If there is evidence of overdispersion in
a Poisson model, the problem then is to determine what gives rise to it. If we
can determine the cause, we can employ the appropriate model to use on the
data.
Analysts have used a variety of tests to determine whether the model
they used on their data actually fits. The earliest fit test used with Poisson
regression, as a member of the GLM family, is called the deviance goodnessof-fit test. The test is based on the deviance statistic, which for many years
was the standard statistic used for IRLS algorithm convergence and was a
standard statistic displayed in GLM model output. Now most IRLS algorithms
use either the deviance or log-likelihood as the basis of convergence, but most
still display the deviance statistic in model results.
The deviance is based on the log-likelihood function, which earlier we
saw is a reparameterization of a probability function. Note, however, that it
is possible to construct a log-likelihood function based on the variance of
the distribution being modeled, independent of any probability function. In
fact, a likelihood may be developed regardless of any underlying PDF. This is
called quasi-likelihood estimation, which we address later in our discussion.
For now, we assume that the log-likelihood is a true one, based on a PDF.
In the case of Poisson regression, the log-likelihood function is based on the
Poisson PDF.
The deviance is defined as the difference between a saturated log-likelihood
and full model log-likelihood. The saturated log-likelihood is calculated by
changing every (mu) in the function to a y. This represents a situation in
which there is a parameter for every observation in the model. It indicates a
model with a perfect, but uninformative, fit:
D=2
n
{L (yi ; yi ) L(i ; yi )}
(3.1)
i=1
The Poisson log-likelihood function is given as

L (; y) =
n

yi log () i log (yi !)
(3.2)
i=1
The saturated log-likelihood function is ylog(y) y log(y!). Subtracting

this function by equation (3.2) results in

n

yi
(yi i )
yi log
(3.3)
D=2
i
i=1
76
TESTING OVERDISPERSION
Note that log(y!), the normalization term that provides for the function to
sum to 1, cancels. In fact, the normalization term for every GLM model
PDF cancels when calculating the respective deviance statistic. Since the
normalization terms can get rather complicated for some distributions, we
can see why the deviance was preferred as the basis of algorithm convergence
especially in the 1970s and 1980s, when computing speed was slow.
The deviance goodness-of-fit (GOF) test is based on the view that the
deviance is distributed as Chi2. The Chi2 distribution has two parameters
the mean and scale. For the deviance GOF, this is the deviance statistic and
residual degrees of freedom, which is the number of observations less predictors in the model, including the intercept and interactions. If the resulting
Chi2 p-value is less than 0.05, the model is considered well fit. Employing the
deviance GOF test on the modeled German health data yields the following
model:1
. glm docvis outwork age, fam(poi) nolog // non-numeric part of header deleted
No. of obs
3874
Optimization
Residual df
3871
Scale parameter
6.249124
: ML
Deviance
24190.35807
(1/df) Deviance
Pearson
43909.61512
(1/df) Pearson
11.34322
AIC
8.074027
BIC
-7792.01
Log likelihood
= -15636.39048
---------------------------------------------------------------------------|
docvis |
OIM
Coef.
Std. Err.
P|z|
----------+----------------------------------------------------------------outwork |
.4079314
.0188447
21.65
0.000
.3709965
.4448663
age |
.0220842
.0008377
26.36
0.000
.0204423
.0237261
_cons |
-.033517
.0391815
-0.86
0.392
-.1103113
.0432773
---------------------------------------------------------------------------.(scalar dev=e(deviance)
. scalar df=e(df)
. di " deviance GOF "" D="dev " df="df " p-value= " chiprob(df, dev)
deviance GOF
D=24190.358 df=3871 p-value= 0
For pedagogical purposes, I am only using a single binary and continuous predictor.
There are more predictors in the data that may significantly contribute to the fit
of the model. In fact, the added predictors do not eradicate the overdispersion
inherent in the data. Later, we will further discuss the strategy of adding predictors
to effect an optimally fitted model.
77
TABLE 3.1. R: Deviance Goodness-of-Fit Test

library(COUNT); data(rwm5yr); rwm1984 - subset(rwm5yr, year==1984)
mymod -glm(docvis ~ outwork + age, family=poisson, data=rwm1984)
mymod
.
Coefficients:
(Intercept)
outwork
age
-0.03352
0.40793
0.02208
Degrees of Freedom: 3873 Total (i.e. Null);

Null Deviance:
3871 Residual
25790
Residual Deviance: 24190
AIC: 31280
dev-deviance(Model); df-df.residual(Model)
p_value-1-pchisq(dev,df)
print(matrix(c("Deviance GOF"," ","D",round(dev,4),"df",df, "p_value",
p_value), ncol=2))
[,1]
[,2]
[1,] "Deviance GOF" " "

[2,] "D"
"24190.3581"
[3,] "df"
"3871"
[4,] "p-value"
"0"
The deviance is 24190.35807 and residual degrees of freedom is 3871.

These are both saved postestimation statistics that can be used for just this
sort of purpose. R code and results are given in Table 3.1. Note that it is
common to see the symbol G or G2 used for the deviance test. I have used D
instead.
Again, for the deviance GOF test, as well as the Pearson GOF tests that
follow, a Chi2 p 0.05 indicates that the model is considered well fit. More
accurately, statistically speaking,
with a p 0.05, the deviance GOF test indicates that we can reject the
hypothesis that the model is not well fitted.
We also assume that the model has not been misspecified and that the model
may appear to fit well by chance alone, as is the case for all such tests. Also,
since it was first proposed, statisticians have discovered that many models
appearing to be well fitted on the basis of the deviance test in fact poorly fit
78
the data. Recall that a p-value of 0.05 accepts that we will be mistaken 1 out
of 20 times on average.
If the value of D is very large, then we can generally be safe in rejecting the
goodness of the model fit:
Deviance is in effect a measure of the distance between the most full or
complete (saturated) model we can fit and the proposed model we are
testing for fit.
The smaller the distance, or deviance, between them, the better the fit. The
test statistic evaluates whether the value of the deviance, for a specific size
of model, is close enough to that of the saturated model that it cannot be
rejected as not fitting.
Many older texts on generalized linear models use a deviance test to compare nested models. A nested model is one that has one or more predictors
dropped from the main model. The p-value for the difference in deviance
between the two models tells us whether the predictors we excluded are statistically important to the modeling of the data. A p-value under 0.05 advises
us that they are important. Parameters may be dropped as well, comparing
similar models that have and do not have that parameter. But the test is usually given to models with and without predictors. In either case, the smaller
model is said to be nested within the larger model. We can also view the test
as evaluating if we should add a predictor to the model. If the difference in
the deviance statistic is minimal when adding a predictor or predictors, we
may conclude that they will contribute little of statistical value to the model
and therefore should not be incorporated into the final model. The logic of
this type of reasoning is well founded, but there is no well-established p-value
to quantify the significance of the differences in deviances. There is, though,
for comparing log-likelihoods, and it is called a likelihood ratio test.
Many analysts use the Pearson Chi2 statistic, Pearson Chi2/rdof, in place of
the deviance GOF statistic. We will not consider using the Pearson Chi2 statistic for a GOF test, though. It appears to produce biased results. However, its
true value comes from its use in defining overdispersion, in particular Poisson overdispersion. The reason for this is that the Pearson Chi2 statistic is
nothing other than the squared residuals weighted or adjusted by the model
variance, and summed across all observations in the model:
n

(yi i )2
=
V (i )
i=1
2
(3.4)
79
The Pearson statistic may also be viewed as the sum of the squared Pearson
residuals as defined later in this chapter. The dispersion statistic of the Poisson
model is defined as the Pearson Chi2 statistic divided by the residual degrees
of freedom. To reiterate from the previous discussion, the residual degrees
of freedom is the number of observations in the model less the number of
predictors, including the intercept and interactions.
The sum of squared residuals is an absolute raw measure (squaring eliminates negative values) of the difference in observed versus predicted model
counts, adjusted by both the variance and size of the model. Adjustment
is made by dividing the squared residuals by the product of the variance
and residual degrees of freedom. The result is the dispersion statistic, which
should have a value of 1 if there is no unaccounted variability in the model
other than what we expect based on the variance function. Values greater than
1 indicate an overdispersed model; values less than 1 are underdispersed.
We discuss the dispersion statistic in much greater detail throughout this
book.
Some statisticians have used the deviance dispersion as the basis for scaling
standard errors. However, as we will find in this book, simulation studies
indicate that
when scaling standard errors, the Pearson dispersion statistic better
captures the excess variability in the data, adjusting model standard
errors in such a manner as to reflect what the standard errors would
be if the excess variability were not present in the data.
In R, Poisson models with scaled standard errors are called quasipoisson:
A Pearson dispersion in excess of 1.0 indicates likely Poisson model
overdispersion. Whether the overdispersion is significant depends on
(1) the value of the dispersion statistic, (2) the number of observations
in the model, and (3) the structure of the data; for example, if the data
are highly unbalanced.
A command exists in Stata to calculate the deviance and Pearson Chi2 statistics and associated p-values for the associated GOF tests. However, it must
be used following the poisson command, which is a full maximum likelihood estimation algorithm that can be used for Poisson models in place
80
TABLE 3.2. R: Function to Calculate Pearson Chi2 and Dispersion

Statistics
P__disp - function(x) {
pr - sum(residuals(x, type="pearson")2)
dispersion - pr/x$df.residual
cat("\n Pearson Chi2 = ", pr ,
"\n Dispersion
= ", dispersion, "\n")
of glm. Ill run the poisson command quietly (no displayed results), then
use the estat gof command to produce both GOF tests:
STATA CODE
. qui poisson docvis outwork age
. estat gof
Deviance goodness-of-fit =
Prob chi2(3871)
=
24190.36
0.0000
=
=
43909.61
0.0000
Pearson goodness-of-fit
Prob chi2(3871)
In R, I can do the same by using

R CODE
pr - sum(residuals(mymod, type="pearson")2)
# get Pearson Chi2
pchisq(pr, mymod$df.residual, lower=F)
[1] 0
# calc p-value
pchisq(mymod$deviance, mymod$df.residual, lower= F)

[1] 0
# calc p-vl
CALCULATING THE DISPERSION STATISTIC

I created the P__disp.r function to use following Rs glm and glm.nb
functions. P__disp.r calculates the Pearson Chi2 and associated dispersion
statistics (see Table 3.2). It can be pasted into the script editor and run before
using it or can be loaded into memory from a site on your computer where
it is saved. It is also part of the COUNT package on CRAN. If COUNT is
installed and loaded into memory, you can use the function anytime. A
deviance test can be created instead by replacing the second line to obtain the
deviance.
81
For example, to load the function from where it is saved in the c:\\Rfiles
directory or folder, type the following:
source("c:\\Rfiles\\P__disp.r")
# use folder where you keep R files
P__disp(mymod)
On the other hand, if COUNT is loaded, simply use the function. As an

example, we will calculate the Pearson Chi2 and dispersion statistics for the
Poisson model of the German health data found in Table 3.1. Recall that Rs
glm function does not display either the Pearson Chi2 or dispersion statistics.
They must be calculated. For the negative binomial model, we use the nbinomial function in place of glm.nb. nbinomial by default displays the
Pearson Chi2 statistic and dispersion, plus the summary of Pearson residuals,
in addition to statistics provided by glm.nb. Note also that the glm function
with a quasipoisson family displays the Pearson dispersion statistic but not
the Pearson Chi2:
R
CODE
library(COUNT)
data(rwm5yr)
rwm1984 - subset(rwm5yr, year==1984)
P__disp(mymod)
Pearson Chi2 =
Dispersion
=
43909.62
11.34322
3.2 OVERDISPERSION: WHAT, WHY, AND HOW

Not all overdispersion is real; apparent overdispersion can sometimes be
identified and the model amended to eliminate it. In Section 2.2, I indicated
what constitutes apparent overdispersion and how to eradicate it. Now we
want to determine its causes and how it is to be tested.
In Table 3.3, we list the major concerns about overdispersion in general
(from Hilbe 2007a).
3.3 TESTING OVERDISPERSION

The first set of tests to give a model when there is evidence of overdispersion are those listed in Table 3.3. These are possible remedies for apparent
82
TABLE 3.3. Overdispersion: What, Why, and How

1. What is overdispersion? Overdispersion in a Poisson model occurs when the
variance of the response is greater than its mean. Overdispersion in general
is the occasion when the observed variance in a model is greater than its
expected variance.
2. What causes overdispersion? Overdispersion is caused by a positive
correlation between responses or by an excess variation between response
probabilities or counts. Overdispersion also arises when there are violations
in the distributional assumptions of the data as well as when there is
proneness in the data (i.e., when earlier events cause or influence the
existence of subsequent events).
3. Why is overdispersion a problem? Overdispersion may cause standard errors
of the estimates to be underestimated (i.e., a variable may appear to be a
significant predictor when it is in fact not significant).
4. How is overdispersion recognized? A model may be overdispersed if the
value of the Pearson Chi2 ( 2 ) divided by the degrees of freedom (dof ) is
greater than 1.0. The quotient is called the dispersion. Small amounts of
overdispersion are of little concern; however, if the dispersion statistic is
greater than 1.25 for moderate-sized models, then a correction may be
warranted. Models with large numbers of observations may be overdispersed
with a dispersion statistic of 1.05.
5. What is apparent overdispersion? How may it be corrected? Apparent
overdispersion occurs when
(a) the model omits important explanatory predictors,
(b) the data include outliers,
(c) the model fails to include a needed interaction term or terms,
(d) a predictor needs to be transformed to another scale (e.g., log or square
root), or
(e) the assumed linear relationship between the response and the link
function and predictors is mistaken (i.e., the link is misspecified). In
the case of count models, this criterion is not applicable for most
circumstances.
overdispersion, not specific tests of overdispersion. If equidispersion can

result in a Poisson model by simply adding an interaction term, or a predictor
that was previously neglected, then we do not need to test the model for future
overdispersion. The important thing to remember, though, is that for the
Poisson model, almost all violations of distributional assumptions, or other
83
situations that result in a poorly fitted model, also result in overdispersion,

and in some cases underdispersion:
r
r
r
r
r
r
Add appropriate predictor

Construct required interactions
Transform predictor(s)
Transform response
Adjust for outliers
Use correct link function
For example, lets see what happens if there is a missing predictor in a

Poisson model. To be sure that a predictor is really needed, we must use a
synthetic model for testing. In Section 2.3, we created a synthetic Poisson
model with three predictors. Refer to the displayed output, noting the values
of the parameter estimates and dispersion statistic, which is .9989237. If we
exclude x2 from the model, we now have a model appearing as
. glm py x1 x3, nolog fam(poi)
No. of obs
50000
Optimization
: ML
Deviance
73496.70743
Residual df
=
Scale parameter =
(1/df) Deviance =
49997
1
1.470022
Pearson
68655.76474
Log likelihood
= -102902.8168
(1/df) Pearson
AIC
BIC
= 1.373198
= 4.116233
= -467459.7
-----------------------------------------------------------------------|
OIM
py |
Coef.
Std. Err.
z
P|z|
-------+---------------------------------------------------------------x1 |
.7513276
.0090462
83.05
0.000
.7335973
.7690579
x3 |
.4963757
.0090022
55.14
0.000
.4787317
.5140196
_cons |
.444481
.0075083
59.20
0.000
.429765
.4591969
------------------------------------------------------------------------
The predictor coefficients are close to their true values; that is, close to the
Poisson distribution parameter values we specified when creating the data.
The intercept is about half its true value. However, we would not normally
know that the value of the intercept differs from the parameters used in
creating the data. The fact that the predictor p-values all approximate 0.000
appears to indicate that the model is well fitted. Many researchers are mislead
in this manner.
84
The value of the Pearson-based dispersion statistic is key to providing the

analyst with a test of fit. The Poisson model assumes that the mean and
variance of the response term are approximately equal. This equidispersion
is indicated when the dispersion statistic has a value of 1. Excluding x2 from
the model causes the dispersion statistic to be inflated to a value of 1.37,
indicating overdispersion.
In this case, we know that adding x2 back into the model will result in a
well-fitted model, and the dispersion statistic will have a value approximating
1. But with real empirical data for which we are attempting to develop a
well-fitted model, we will not know in advance the true parameter values.
We do know, however, that if a Poisson model dispersion statistic does not
approximate 1.0, then it is not equidispersed, and not well fitted. We can use
the tests discussed in this and other texts to help identify the source of the
extradispersion, and if successful attempt to fix the model. But it may be the
case that the data are simply not Poisson that we must amend the basic
Poisson model or even use another model on the data.
To reiterate, just because the predictors of a Poisson model are all significant does not in itself indicate that the model is well fitted. We must check
the dispersion statistic. If the dispersion does not approximate a value of 1.0,
the model is not a well-fitted Poisson model, regardless of the significance
of the predictors. We cannot rely on the model to appropriately inform us
about the response. Predictions based on an ill-fitted model and conclusions
based on the coefficients and their exponentiations are biased. An alternative
model needs to be constructed.
If an analyst is confronted with a Poisson model having a dispersion statistic greater than 1.0, I suggest that they first check the six remedies we gave
earlier to determine whether applying one results in an equidispersed Poisson model. The model may be only apparently over- or underdispersed.
If such adjustment fails to result in a dispersion of approximately 1.0, try
to determine what caused the extradispersion and identify a model suited
for it.
There are tests for Poisson overdispersion other than checking the dispersion. These will be examined next.
3.3.1 Score Test

The concept of overdispersion is central to the understanding of both Poisson and negative binomial models. Nearly every application of the negative
85
TABLE 3.4. R: z-Score Test

summary(poi - glm(docvis ~ outwork + age, family=poisson, data=rwm1984))
mu -predict(poi, type="response")
z - ((rwm1984$docvis - mu)2 - rwm1984$docvis)/ (mu * sqrt(2))
summary(zscore - lm(z ~ 1))
binomial is in response to perceived overdispersion in a Poisson model. I

have thus far only touched on the problem of ascertaining whether indicators
of overdispersion represent real overdispersion in the data or only apparent.
Apparent overdispersion can usually be accommodated by various means in
order to eradicate it from the model. However, real overdispersion is a problem affecting the reliability of both the model parameter estimates and fit in
general.
In the previous section, I showed one manner in which overdispersion
could be detected in a Poisson model. Well address other methods in the
next chapter. However, two related yet well-used tests are at times provided
in commercial software applications. These are the score and Lagrange multiplier tests. (R code for each is given in Tables 3.4 and 3.5, respectively.)
A score test to evaluate whether the amount of overdispersion in a Poisson
model is sufficient to violate the basic assumptions of the model may be
defined as
z=
(y )2 y
(3.5)
The test is post hoc (i.e., it is executed after the data have been modeled). Using
the rwm1984 data as earlier defined, we first model the data using Poisson
TABLE 3.5. R: Lagrange Multiplier Test

obs - nrow(rwm1984)
# continue from Table 3.2)
mmu - mean(mu); nybar - obs*mmu; musq - mu*mu)

mu2 - mean(musq)*obs)
chival - (mu2 - nybar)2/(2*mu2); chival)
pchisq(chival,1,lower.tail = FALSE))
86
regression. Then we predict , calculate z from the preceding formula, and

regress z using a basic linear regression:
. glm docvis outwork age, fam(poi) nolog nohead
-----------------------------------------------------------------------|
OIM
docvis |
Coef.
Std. Err.
z
P|z|
--------+--------------------------------------------------------------outwork |
age |
_cons |
.4079314
.0220842
-.033517
.0188447
.0008377
.0391815
21.65
26.36
-0.86
0.000
0.000
0.392
.3709965
.0204423
-.1103113
.4448663
.0237261
.0432773
-----------------------------------------------------------------------. predict mu
. gen double z=((docvis-mu)2-docvis)/ (mu*sqrt(2))
. regress z
Source |
SS
df
MS
-----------+------------------------------
Number of obs =
F( 0, 3873) =
3874
0.00
Model |
0
0
.
Residual |
16012865 3873
4134.4862
-----------+------------------------------
Prob F
=
R-squared
=
Adj R-squared =
.
0.0000
0.0000
Total |
16012865 3873
4134.4862
Root MSE
=
64.3
-----------------------------------------------------------------------z |
Coef.
Std. Err.
t
P|t|
-----------+-----------------------------------------------------------_cons | 7.30804
1.033073
7.07
0.000
5.282622
9.333459
------------------------------------------------------------------------
The z score test is 7.3, with a t-probability of 0.0005. z tests the hypothesis
that the Poisson model is overdispersed; it evaluates whether the data are
Poisson or negative binomial. This example indicates that the hypothesis of
no overdispersion is rejected (i.e., that it is likely that real overdispersion
exists in the data).
The test is based on two assumptions:
r The data set on which the test is used is large.
r z is t-distributed.
The preceding z-test result indicates that there is overdispersion in the data.
Other z tests have been constructed, and you will find a variety of alternatives
in the literature. The most popular alternative is perhaps an auxiliary regression test, for whichthe equation is the same as equation (3.5) but without
the adjustment of 2, or simply 1.4142 (which is easy to remember using a
87
mnemonic, such as 1414, or 1 with a decimal of 4142). The analyst can

test whether the overdispersion in a Poisson model can be adjusted for by
using an NB1 or NB2 model. I do not discuss it further since there are more
powerful methods you should use. It is important, though, to be aware of the
existence of the test should you see it in a study report.
3.3.2 Lagrange Multiplier Test

The Lagrange multiplier test is a Chi2 test. It can be defined as
2
n
2
i
i=1 i n y
2
n
=
2 i=1
i2
(3.6)
with one degree of freedom. Again, using Stata commands to calculate the
statistic, we have
STATA CODE
. summ docvis, meanonly
/* solving for Lagrange Multiplier */
. scalar nybar = r(sum)

. gen double musq = mu*mu
. summ musq, meanonly
. scalar mu2 = r(sum)
. scalar chival = (mu2-nybar)2/(2*mu2)
. display "LM value = " chival _n "P-value = " chiprob(1,chival)
LM value = 11582.694
P-value = 0
With one degree of freedom, the test appears to be significant the hypothesis
of no overdispersion is again rejected:
A Chi2 statistic of 3.84 has a p-value of 0.05.
Higher values of Chi2 result in lower p-values.
For example, a Chi2 of 7.5 has a p of 0.00617.
The preceding inset should be memorized. Chi2 tests permeate statistics.2
2
Recall that 95% confidence intervals (p = .05) are defined as 1.96*(se).

This defines a one-sided value of the normal PDF. 1.96 is in fact a p = .025. For
88
Count of Patients
500
1000
1500
Observed vs Expected Visits
10
15
Number Visits to Physician
Expected days
20
25
Observed days
FIGURE 3.1. Observed versus expected doctor visits.
3.3.3 Chi2 Test: Predicted versus Observed Counts

A majority of analysts consider the most important test of fit for a count
model to be an analysis of the difference between observed and expected
counts across the full range of counts in the data (see Figure 3.1). Tables 3.6
and 3.7 provide the Stata and R code, respectively, to create a table of observed
versus predicted (expected) counts following model estimation. The code for
each may be amended so that you may incorporate it into your own research
projects.
the default meaning of a p-value (i.e., two-sided), we want this value so that
we encompass .025 on both the left and right sides of the normal distribution:
.025*2 = .05.
STATA
R
. di normal(1.96)
.9750021
pnorm(1.96)
[1] 0.9750021
. di -invnormal(.025)
1.959964
-qnorm(.025)
[1] 1.959964
89
TABLE 3.6. Stata do File Observed versus Predicted Counts

use rwm1984, clear
qui glm docvis outwork age, fam(poisson)
predict mu
count
gen nobs = e(N)
local i 0
local newvar "pri"
* Predicted probability at each day
while i =25 {
local newvar "pri"
qui gen newvar =
local i = i + 1
}
poissonp(mu, i)
quietly gen cnt = .

quietly gen observ = .
quietly gen expect = .
local i 0
*: Observed and expected docvis
while i =25 {
local obs = i + 1
replace cnt = i in obs
tempvar obser
gen obser = e(depvar) ==i
sum obser
/* (docvis==i) */
replace observ = r(mean)* nobs in obs

sum pri
replace expect = r(mean)* nobs in obs
local i = i + 1
}
*: Preparation for table
gen byte count = cnt
gen diff = observ - expect
drop cnt pr0-pr25 nobs mu
list count observ expect diff in 1/21
lab var expect "Expected days"
lab var observ "Observed days"
label var count "Number visits to Physician"
twoway scatter expect observ count, c(l l) ms(T d) ///
title(Observed vs Expected visits) ytitle(Count of patients)
90
TABLE 3.7. R: Poisson Model with Ancillary Statistics

summary(poi1 - glm(docvis ~ outwork + age, family=poisson, data=rwm1984))
pr - sum(residuals(poi1, type="pearson")2)
pr/poi1$df.residual
# Pearson Chi2
poi1$aic / (poi1$df.null+1)
# AIC/n
exp(coef(poi1))
# IRR
exp(coef(poi1))*sqrt(diag(vcov(poi1)))
# delta method
exp(confint.default(poi1))
# CI of IRR
modelfit(poi1)
# same as Stata abic
sd(rwm1984$docvis)2
# observed variance
xbp - predict(poi1)
# xb, linear predictor
mup - exp(xbp)
# mu, fitted Poisson
mean(mup)
# expected variance: mean=variance
# Table of observed vs expected counts

rbind(obs=table(rwm1984$docvis)[1:18],
exp = round(sapply(0:17, function(x)sum(dpois(x, fitted(poi1))))))
meany - mean(rwm1984$docvis)
# mean docvis
expect0 - exp(-meany)*meany0/exp(log(factorial(0))) #expected prob of 0

zerodays - (poi1$df.null+1) *expect0
# expected zero days
obs=table(rwm1984$docvis)[1:18] #observed number values in each count0-17

# expected each count
exp = round(sapply(0:17, function(x)sum(dpois(x, fitted(poi1)))))
chisq.test(obs, exp)
# ChiSq test if obs & exp from same pop
Note: Expected value based on mean of docvis. Different from Stata.

+----------------------------------------+
| count
observe
expect
diff |
|----------------------------------------|
1. |
1611
264.7923
2. |
448
627.102
1346.208 |
-179.102 |
3. |
440
796.0545
-356.0545 |
4. |
353
731.5981
-378.5981 |
5. |
213
554.6024
-341.6024 |
|----------------------------------------|
6. |
168
373.3741
-205.3741 |
7. |
141
232.9783
-91.97826 |
8. |
60
137.5237
-77.52374 |
9. |
85
77.19441
7.805588 |
10. |
47
41.09616
5.903843 |
20. |
19
.
6
.0028615
5.997139 |
|----------------------------------------|
21. |
20
.0008157
3.999184 |
91
partial output displayed

R CODE
sd(rwm1984$docvis)2
# observed variance
[1] 39.38
mean(mup)
# expected variance:
mean=variance
[1] 3.16
rbind(obs=table(rwm1984$docvis)[1:18], exp = round(sapply(0:17,
function(x) sum(dpois(x, fitted(poi1))))))
0
obs 1611 448 440 353 213 168 141

exp
9 10 11 12 13 14 15 16 17
60 85 47 45 33 43 25 13 21 13 11
265 627 796 732 555 373 233 138 77 41 21 10
Pearsons Chi-squared test

data:
obs and exp
X-squared = 258, df = 240, p-value = 0.2027
For the Poisson model, the observed variance is 39.38, whereas the expected
variance is 3.16, indicating substantial overdispersion. In addition, note the
vastly greater number of observed zero counts compared with what we expect
given the mean of docvis. We will see why we need to explicitly adjust the
model as a result of this fact. Without adjustment by the fitting of explanatory predictors, we should have expected 164 of the 3874 patients not to
visit a physician during 1984, based on the Poisson distribution. A fitted
model predicts that 265 patients failed to visit a physician. In fact, 1611
(41.58%) patients never went to a physician during the year. There are far
more zero visits in the data than allowed using the Poisson model, which
without adjustment assumes that only 164 (4.2%) patients, given a mean
of 3.16 days, did not need to visit a physician. Another model needs to
be used to better fit the number of physician visits during 1984. Again,
an excess of zero counts is a common reason for having an overdispersed
Poisson model. The Chi2 test is sometimes used as a fit test to determine
whether the predicted number of counts come from the same population as
the observed values for each count, from 0 to a specified upper value. Here
the null hypothesis cannot be rejected and the two cannot be significantly
separated.
92
Using Stata, we can determine the observed and expected values for
0 counts as follows:
STATA CODE
. count
3874
. count if docvis==0
1611
. di 1611/3874
.41584925
// number of counts in model
// number of 0 counts
// percentage of 0 counts in data
. di exp(-3.162881) * 3.1628810 / exp(lnfactorial(0))

prob of 0s.
.04230369
//
predicted
To calculate how many 0 counts are expected, we multiply the number of

observations in the model (3874) by 0.0423, giving 164, which is far fewer
than the 1611 actually observed in the data.
3.4 METHODS OF HANDLING OVERDISPERSION

3.4.1 Scaling Standard Errors: Quasi-count Models
Scaling of standard errors was the first method used to deal with overdispersion in binomial and count response models. The method replaces the W, or
model weight, in the IRLS algorithm when s (betas) are calculated
= (X W X)1 X Wz
(3.7)
with the inverse square root of the dispersion statistic. Scaling by the Pearson
dispersion statistic entails estimating the model, abstracting the dispersion
statistic, and multiplying the model standard errors by the square root of
the dispersion, and then running one additional iteration of the algorithm,
but as
= (X Wd X)1 X Wd z
(3.8)
Scaling in effect adjusts the model standard errors to the value that would
have been calculated if the dispersion statistic had originally been 1.0. The
Pearson-based dispersion statistic should always be used to assess count
93
model overdispersion; binomial models may use either the deviance or

Pearson dispersion, but I suggest the Pearson.
An example will demonstrate how an overdispersed model can have the
standard errors adjusted, providing the user with a more accurate indication
of the true standard errors. I will use the medpar data that are in the COUNT
and msme packages on CRAN and on this books web site. The medpar data
consist of 1991 Arizona Medicare in-patient (hospital) data collected for a
particular disease. The key variables for our model are follows:
Response:
Predictors:
los
hmo
length of stay
1 = member of a Health Maintenance Organization
(HMO); 0 = private pay
1 = identifies as white; 0 = other
1 = elective admission (reference level)
1 = urgent admission
1 = emergency admission
white
type1
type2
type3
The data are modeled as

. glm los hmo white type2 type3, fam(poi) nolog
No. of obs
1495
Optimization
: ML
Deviance
8142.666001
Residual df
=
Scale parameter =
(1/df) Deviance =
1490
1
5.464877
Pearson
9327.983215
Log likelihood
= -6928.907786
(1/df) Pearson
AIC
BIC
= 6.260391
= 9.276131
= -2749.057
-----------------------------------------------------------------------|
OIM
los |
Coef.
Std. Err.
z
P|z|
-------+---------------------------------------------------------------hmo | -.0715493
.023944
-2.99
0.003
-.1184786
-.02462
white |
type2 |
type3 |
-.153871
.2216518
.7094767
.0274128
.0210519
.026136
-5.61
10.53
27.15
0.000
0.000
0.000
-.2075991
.1803908
.6582512
-.100143
.2629127
.7607022
_cons |
2.332933
.0272082
85.74
0.000
2.279606
2.38626
------------------------------------------------------------------------
The Pearson Chi2 dispersion is an extremely high 6.26, especially considering

the relatively large number of observations. For example, based on the original
94
standard error for hmo of .023944, we may calculate a scaled standard error as
sqrt(6.260391) * .023944 = .05990974. Scaled standard errors are calculated
for this model as
. glm los hmo white type2 type3, fam(poi) nolog scale(x2)
No. of obs
1495
Optimization
Residual df
1490
: ML
Scale parameter =
1
5.464877
Deviance
8142.666001
(1/df) Deviance =
Pearson
9327.983215
(1/df) Pearson
6.260391
AIC
9.276131
BIC
= -2749.057
= -6928.907786
Log likelihood
-------------------------------------------------------------------------|
los |
OIM
Coef.
Std. Err.
P|z|
[95% Conf.
Interval]
-------+-----------------------------------------------------------------hmo |
-.0715493
.0599097
-1.19
0.232
-.1889701
.0458715
white |
-.153871
.0685889
-2.24
0.025
-.2883028
-.0194393
type2 |
.2216518
.0526735
4.21
0.000
.1184137
.3248899
type3 |
.7094767
.0653942
10.85
0.000
.5813064
.837647
_cons |
2.332933
.0680769
34.27
0.000
2.199505
2.466361
-------------------------------------------------------------------------(Standard errors scaled using square root of Pearson X2-based dispersion.)

R:
quasipoisson
=======================================================
summary(poiql - glm(los ~ hmo + white + hmo + factor(type),
family=quasipoisson, data=medpar))
=======================================================
The R quasipoisson family option is aimed to adjust for overdispersion in

Poisson models, but it is simply scaling the standard errors using the method
described here. In order to obtain the same confidence intervals as Stata, SAS,
and other packages, use the confint.default(poiql) option. Profile confidence
intervals are also displayed for the quasipoisson option.
Remember that this method is post hoc, meaning that a standard model
is estimated, followed by a calculation of the Pearson dispersion and scaling term, and another iteration of the regression, but with the scaled standard errors in place of model-based standard errors and CIs. By-hand versus
quasipoisson R code for calculating scaled standard errors and confidence
intervals is provided in Table 3.8.
A table of incidence rate ratio statistics can be produced and displayed by
exponentiating the model coefficients and appropriately adjusting associated
95
TABLE 3.8. R: Scaling SE medpar Data

library(COUNT); data(medpar); attach(medpar)
summary(poi - glm(los ~ hmo + white + factor(type),
family=poisson,
data=medpar))
confint(poi)
# profile confidence interval
pr - sum(residuals(poi,type=pearson)2)
# Pearson statistic
dispersion - pr/poi$df.residual; dispersion
# dispersion
sse - sqrt(diag(vcov(poi))) * sqrt(dispersion); sse
# model SE
# OR
poiQL - glm(los ~ hmo + white + factor(type), family=quasipoisson,
data=medpar)
coef(poiQL); confint(poiQL)
# coeff & scaled SEs
modelfit(poiQL)
# AIC,BIC statistics
statistics. The eform option generates such output using Stata glm command,
and the irr option with the poisson and nbreg commands. The R function
exp(coef(model_name)) is used following glm and glm.nb. A Stata table of
rate ratios, with scaled standard errors, can be displayed using the code
. glm los hmo white type2 type3, nolog fam(poi) eform scale(x2) nohead
----------------------------------------------------------------------------|
los |
OIM
IRR
Std. Err.
P|z|
[95% Conf.
Interval]
-------+--------------------------------------------------------------------hmo |
.9309504
.0557729
= -1.19
0.232
.8278113
1.04694
white |
.8573826
.0588069
-2.24
0.025
.7495346
.9807484
type2 |
1.248137
.0657437
4.21
0.000
1.12571
1.383878
type3 |
2.032927
.1329416
10.85
0.000
1.788373
2.310923
----------------------------------------------------------------------------(Standard errors scaled using square root of Pearson X2-based dispersion)
Recall that I mentioned earlier that the standard error of the incidence rate
ratio (IRR) is not directly based on a model variancecovariance matrix.
Rather, standard errors for IRRs are calculated using the delta method. Applied
to this situation, the scaled standard errors of the IRR are calculated by
multiplying the IRR by the scaled model SE. For hmo, we have .9309504 *
.0599097 = .05577296, which we observe is correct.
It needs to be emphasized that the parameter estimates remain unaffected
when standard errors are scaled. When a Poisson (or negative binomial)
96
TABLE 3.9. medpar Data: Poisson Model Interpretation

HMO members have 7% fewer days in the hospital than private-pay patients,
holding the other predictor values at their mean.
Patients identifying themselves as white have 15% fewer days in the hospital than
nonwhite patients, holding other predictor values at their mean.
Urgent admissions stay in the hospital 25% longer than elective admissions, holding
other predictor values at their mean.
Emergency admissions stay in the hospital twice as long as elective admissions,
holding other predictor values at their mean.
model is moderately overdispersed, scaling can be an effective way to adjust

standard errors to values that would be the case if the model was not overdispersed. Scaling is an easy, quick-and-dirty method of adjusting standard
errors for overdispersion. However, when data are highly correlated or clustered, model slopes or coefficients usually need to be adjusted as well. Scaling
does not accommodate that need, but simulations demonstrate that it is quite
useful for models with little to moderate overdispersion.
3.4.2 Quasi-likelihood Models

Quasi-likelihood (QL) methods were first developed by Wedderburn (1974).
They are based on GLM principles but allow parameter estimates to be calculated based only on a specification of the mean and variance of the model
observations without regard to those specifications originating from a member of the single-parameter exponential family of distributions. Further generalizations to the quasi-likelihood methodology were advanced by Carroll
and Rupert (1981) and Nelder and Pregibon (1987). Called extended quasilikelihood (EQL) methods, they were designed to evaluate the appropriateness of the QL variance in a model. However, EQL models take us beyond
the scope of our discussion. Quasi-likelihood models, though, are important
for understanding extensions to the Poisson and negative binomial models
we consider later.
Quasi-likelihood methods allow us to model data without explicit specification of an underlying log-likelihood function. Rather, we begin with mean
and variance functions, which are not restricted to the collection of functions defined by single-parameter exponential family members, and abstract
97
backward to the implied log-likelihood function. Since this implied loglikelihood is not derived from a probability function, we call it quasilikelihood or quasi-log-likelihood instead. The quasi-likelihood, or the
derived quasi-deviance function, is then used, for example, in an IRLS algorithm to estimate parameters just as for GLMs when the mean and variance
functions are those from a specific member of the exponential family.
The quasi-likelihood is defined as

Q (y; ) =
y
y
V ()
(3.9)
In an enlightening analysis of leaf-blotch data, the quasi-deviance was applied

by Wedderburn using the logit link and a squared binomial variance function 2 (1 )2 . However, the same logit could also have been specified with
traditional exponential family variance functions. In the case of the Poisson,
we see that by taking the integral of (y ) from to y with respect to
, the resultant equation is the Poisson log-likelihood but without the final
ln(y!) normalizing term. The normalizing term is what ensures that the sum
of the probabilities over the probability space adds to unity. The negative
binomial (NB2) log-likelihood function can be similarly abstracted using the
variance function + 2 .
The manner in which quasi-likelihood methodology is typically brought
to bear on overdispersed Poisson data is to multiply the variance by some
constant scale value, indicated as .
The fact that the variance function is multiplied by a constant changes the
likelihood, or the deviance function, by dividing it by the scale. It is the next
stage in amending the Poisson variance function to adjust for overdispersion.
The same medpar data will be used as an example. In this case, we enter
the Pearson dispersion statistic that we obtained from the base or standard
Poisson model as the variance multiplier:
QUASI-LIKELIHOOD: VARIANCE MULTIPLIER
. glm los hmo white type2 type3, fam(poi) nolog disp(6.260391) irls
No. of obs
=
1495
Optimization
: MQL Fisher scoring
Residual df
=
1490
Deviance
Pearson
=
=
(IRLS EIM)
1300.664128
1490.00008
Scale parameter =
(1/df) Deviance =
(1/df) Pearson =
Quasi-likelihood model with dispersion: 6.260391
BIC
6.260391
.8729289
1
= -9591.059
98
-----------------------------------------------------------------------|
EIM
los |
Coef.
Std. Err.
z
P|z|
-------------+---------------------------------------------------------hmo | -.0715493
.0095696
-7.48
0.000
-.0903054
-.0527932
white |
-.153871
.010956
-14.04
0.000
-.1753444
-.1323977
type2 |
type3 |
_cons |
.2216518
.7094767
2.332933
.0084138
.0104457
.0108742
26.34
67.92
214.54
0.000
0.000
0.000
.2051611
.6890035
2.31162
.2381424
.7299499
2.354246
------------------------------------------------------------------------
Extra variation is dampened from the variance when multiplying it by the

value of the dispersion, 6.260391, which was given in the output of the earlier
scaled model. This is the same as dividing the model standard error by the
square root of the dispersion. For example, the model standard error of hmo
is .023944. Dividing, we have
. di .023944/sqrt(6.260391)
.00956965
which is the standard error of hmo for the quasi-likelihood Poisson model,
as we just observed. Note that the Pearson-dispersion value of this QL model
is now 1.0. Also, compare to scaling, for which the model standard error is
multiplied by the square root of the dispersion.
Compare the summary statistics of this model with the standard Poisson
model applied to the same data and the model scaled by the dispersion. The
deviance statistic is substantially less than that of the standard and scaled models, which will always have the same values except for the standard errors and
related statistics (p, z, CI). The deviance of the standard Poisson is 8242.666,
and for the quasi-likelihood model its 1300.664, indicating a much better fit.
By fit in this case we mean more accurate predictor standard errors and pvalues. The quasi-likelihood model is not a true likelihood model, and hence
the standard errors are not based on a correct model-based Hessian matrix.
(R code for quasi-likelihood Poisson standard errors is given in Table 3.10.)
TABLE 3.10. R: Quasi-likelihood Poisson Standard Errors
poiQL - glm(los ~ hmo+white+type2+type3, family=poisson, data=medpar)
summary(poiQL)
pr -sum(residuals(poiQL, type="pearson")2 )
disp - pr/poiQL$df.residual
# Pearson dispersion
se -sqrt(diag(vcov(poiQL)))
QLse - se/sqrt(disp); QLse
99
TABLE 3.11. Implementation of Robust or Empirical Standard Errors

r
r
r
r
r
r
Estimate the model.

Calculate the linear predictor, x.
Calculate the score vector: g= g(; x) = xLL(x)/x) = ux.
Calculate the dof adjustment: n(n 1).
Combine terms: V() = V(n(n 1)u2 xx)V.
Replace the model variancecovariance matrix with a robust estimator: an
additional iteration with a new matrix.
Note that with the Stata command, the irls option is required to use this
method of adjusting standard errors, which, again, are much tighter than
scaled standard errors.
This method is rarely used for making adjustments, but the method of
multiplying the Poisson variance by some value runs through much of this
book. It is important to keep it in mind.
3.4.3 Sandwich or Robust Variance Estimators

Unlike the standard variance estimator, H()1 , a robust variance estimator
adjusts standard errors for correlation in the data. That is, robust standard
errors should be used when the data are not independent, perhaps gathered over different households, hospitals, schools, cities, litters, and so forth.
Robust variance estimators have also been referred to as sandwich variance
estimators or heteroskedastic robust estimators. Other names for this method
of adjusting standard errors are Huber or White standard errors, or empirical
standard errors. Huber (1967) was the first to discuss this method, which was
later independently discussed by White (1980) in the field of econometrics.
Robust variance estimators are implemented in a postestimation procedure
according to the schema outlined in Table 3.11. Again, their foremost function
is to adjust standard errors for data that are not independent. Many statisticians argue that robust standard errors (Table 3.12 gives R code for the
medpar model) should be the default standard errors for all count response
regression models. Others prefer to employ profile likelihood standard errrors
as the default. In fact, most researchers use regular model standard errors as
the default and employ robust and profile techniques when it is clear that
model assumptions have been violated.
We will find that robust variance estimators are quite robust, hence the
name, when modeling overdispersion in count response models. They also
100
TABLE 3.12. R: Robust Standard Errors of medpar Model

library(sandwich)
poi - glm(los ~ hmo + white + factor(type), family=poisson, data=medpar)
vcovHC(poi)
sqrt(diag(vcovHC(poi, type="HC0")))
# final HC0 = H-C-zero
# Clustering
library(haplo.ccs)
sandcov(poi, medpar$provnum)
sqrt(diag(sandcov(poi, medpar$provnum)))
play an important role when interpreting the Poisson or negative binomial

parameter estimates as risk ratios.
An example using the same medpar data is displayed, but I use the i-dot
prefix for creating a factor predictor instead of having indicator or dummy
variables for the nonreference levels. It makes no difference in the calculations; only the display differs. The same holds true for R. An analyst can create
separate indicator variables for each nonreference level, or use the factor()
function, with the first level being the default reference. In SAS, the top or
highest level is the default reference. Of course, there are other schema used
when factoring, as learned in introductory statistics courses, but I will not be
concerned with them in this book. In fact, the dummy or indicator approach
to factoring categorical variables is by far the most common method used for
modeling counts:
POISSON WITH ROBUST VARIANCE ESTIMATOR
. glm los hmo white i.type, fam(poi) vce(robust) nolog
No. of obs
1495
Optimization
: ML
Deviance
8142.666001
Residual df
=
Scale parameter =
(1/df) Deviance =
1490
1
5.464877
Pearson
9327.983215
Log pseudolikelihood = -6928.907786
(1/df) Pearson
AIC
BIC
= 6.260391
= 9.276131
= -2749.057
-----------------------------------------------------------------------|
Robust
los |
Coef.
Std. Err.
z
P|z|
------+----------------------------------------------------------------hmo | -.0715493
.0517323
-1.38
0.167
-.1729427
.0298441
white |
-.153871
.0833013
-1.85
0.065
-.3171386
.0093965
101
|
type |
2 |
.2216518
.0528824
4.19
0.000
.1180042
.3252993
3 |
.7094767
.1158289
6.13
0.000
.4824562
.9364972
_cons |
2.332933
.0787856
29.61
0.000
2.178516
2.48735
------------------------------------------------------------------------
When robust variance estimators are applied to this type of quasi-likelihood

model, we find that the effect of the robust variance overrides the adjustment
made to the standard errors by the multiplier. It is as if the initial quasilikelihood model had not been estimated in the first place.
Robust variance estimators can also be applied to models consisting of clustered or longitudinal data. Many data situations take this form. For instance,
when gathering treatment data on patients throughout a county, it must be
assumed that treatments given by individual providers are more highly correlated within each provider than between providers. Likewise, in longitudinal
data, treatment results may be recorded for each patient over a period of time.
Again, it should be assumed that results are more highly correlated within
each patient record than between patients. Data such as these are usually
referred to as panel data. Robust variance adjustments of some variety must
be applied to the data to reflect the fact that observations are not independent.
Modified sandwich variance estimators or robust cluster variance estimators provide standard errors that allow inference that is robust to withingroup correlation but assume that clusters of groups are independent. The
procedure to calculate this type of robust estimate begins by summing the
scores within each respective cluster. The data set is thereupon collapsed so
that there is only one observation per cluster or panel. A robust variance
estimator is then determined in the same manner as in the noncluster case,
except n is now the number of clusters and u consists of cluster sums. Refer
to Table 3.11. A complete discussion of robust panel estimators is found in
Hilbe (2009a) and Hardin and Hilbe (2013a).
The medpar data provide the hospital provider code with each observation.
Called provnum, it is entered as an option to obtain the modified sandwich
variance estimator. Unlike scaling and variance multipliers, robust estimators
may be used with any maximum likelihood algorithm, not only GLM-based
algorithms:
POISSON: CLUSTERING BY PROVIDER
glm los hmo white i.type, fam(poi) cluster(provnum)nolog
Optimization
: ML
No. of obs
Residual df
=
=
1495
1490
102
=
=
Deviance
Pearson
Scale parameter =
(1/df) Deviance =
(1/df) Pearson =
8142.666001
9327.983215
1
5.464877
6.260391
AIC
= 9.276131
BIC
= -2749.057
(Std. Err. adjusted for 54 clusters in provnum)
-----------------------------------------------------------------------|
Robust
los |
Coef.
Std. Err.
z
P|z|
------+----------------------------------------------------------------hmo | -.0715493
.0527299
-1.36
0.175
-.1748979
.0317993
white |
type |
2 |
-.153871
.0729999
-2.11
0.035
-.2969482
-.0107939
.2216518
.0609139
3.64
0.000
.1022626
.3410409
3 |
.7094767
.202999
3.49
0.000
.311606
1.107347
_cons |
2.332933
.0669193
34.86
0.000
2.201774
2.464093
------------------------------------------------------------------------
Standard errors are produced by adjusting for the clustering effect on

providers that is, we suppose that the relationship between length of stay
(los) and predictors is more highly correlated within a provider than between
providers. This is a reasonable supposition, but in this case it appears that
there is only a minimal clustering effect caused by providers. There is overdispersion, though look at the unadjusted standard errors again. The empirical
(robust) standard errors are double to triple the size of the model standard
errors. Overdispersion results in the deflation of standard errors, which means
that the denominator of coef / se is smaller and the value of z larger. As a
result, overdispersion in general makes it appear that a predictor is significant
(or contributes more to the understanding of the response) when in fact it is
not. Smaller values of z are preferred, with a z of 1.96 being the two-sided
.05 criterion for z (normal) significance based on the cumulative standard
normal distribution:
STATA CODE
. di normal(-1.96)*2
.04999579
R CODE
pnorm(-1.96)*2
[1] 0.04999579
. glm los hmo white i.type, fam(poi)
nolog nohead
-----------------------------------------------------------------------|
OIM
los |
Coef.
Std. Err.
z
P|z|
-------+---------------------------------------------------------------hmo | -.0715493
.023944
-2.99
0.003
-.1184786
-.02462
103
white |
type |
2 |
-.153871
.0274128
-5.61
0.000
-.2075991
-.100143
.2216518
.0210519
10.53
0.000
.1803908
.2629127
3 |
.7094767
.026136
27.15
0.000
.6582512
.7607022
_cons |
2.332933
.0272082
85.74
0.000
2.279606
2.38626
----------------------------------------------------------------------- summary(poi1 - glm(los ~ hmo+white+factor(type), family=poisson,
data=medpar))
Again we find overdispersion, but because there is little difference in SEs

when comparing robust to robust clustered by provnum, we may conclude
that there is no clustering effect based on hospital. Which hospital a patient is
at makes no difference in their length of stay. The data can be pooled, meaning
we do not need cluster (provnum) in the model. Note again that all summary
statistics are the same as in the unadjusted model.
Statisticians frequently use empirical standard errors with Poisson regression as a catch-all adjustment for extradispersion, or any type of excess
correlation in the data. Given the fact that the majority of Poisson models
are extradispersed, many analysts simply employ empirical standard errors
with all Poisson models. If the model is in fact equidispersed and the data
are well fit using a Poisson model, the model and empirical standard errors
will be nearly identical. If the model is over- or underdispersed, using empirical standard errors will provide the analyst with more accurate information
regarding the significance of the predictors in explaining the count response.
In addition, the exponentiated coefficients of a Poisson model with empirical
standard errors can be referred to as rate ratios.
TABLE 3.13. R: Bootstrap Standard Errors

library(COUNT); library(boot); data(medpar)
summary(poi)
t - function (x, i) {
xx - x[i,]
bsglm - glm( los ~ hmo + white + factor(type), family=poisson, data=medpar)
return(sqrt(diag(vcov(bsglm))))
}
bse - boot(medpar, t, R=1000)
sqrt(diag(vcov(poi))); apply(bse$t,2, mean)
104
Consider a 2 2 table using the 1912 Titanic survival data:

STATA CODE
. use titanic
. gen died = survived
. recode died 1=0 0=1
. tab died age
0
| Age (Child vs Adult)

died |
child
adults |
Total
-----------+----------------------+---------0 |
1 |
57
52
442 |
765 |
499
817
-----------+----------------------+---------Total |
109
1,207 |
1,316
The risk or probability of death for adults is

. di 765/1207
.63380282
The risk of death for children is

. di 52/109
.47706422
The risk or probability of death as an adult passenger on the Titanic compared

with that for children is then
. di (765/1207) / (52/109)
1.3285482
. glm died age, fam(poi) nolog nohead vce(robust) ef
-----------------------------------------------------------------------|
Robust
died |
IRR
Std. Err.
z
P|z|
-------+---------------------------------------------------------------age |
1.328548
.1364152
2.77
0.006
1.086366
1.62472
_cons |
.4770642
.0478591
-7.38
0.000
.3919082
.5807235
------------------------------------------------------------------------
I do not show the calculations here, but the standard error for the risk of death
based on age for those in the Titanic disaster is .134. Regardless of whether
we use model or empirical standard errors with a Poisson regression, though
105
(or negative binomial), the logic of the table analysis given here is the basis
for interpreting coefficients in terms of probabilities. For example, here we
may conclude that the likelihood or probability of death for adults is some
33% greater than it is for children. See Hilbe (2011) for a full estimation of
risk ratio and risk difference.
3.4.4 Bootstrapped Standard Errors

The final method we discuss for adjusting count model standard errors in the
face of overdispersion is the method known as the bootstrap (see Table 3.13
for R code). Nonparametric bootstrapping makes no assumptions about the
underlying distribution of the model. Standard errors are calculated based on
the data at hand. Samples are repeatedly taken from the data (with replacement), with each sample providing model estimates. The collection of vector
estimates for all samples is used to calculate a variance matrix from which
reported standard errors are calculated and used as the basis for determining confidence intervals. Such confidence intervals can be constructed from
percentiles in the collection of point estimates, or from large sample theory
arguments. The example that follows uses 1000 samples of 1495; each sample provides an estimated coefficient vector from which standard errors are
calculated. The number of samples may be changed.
. bootstrap, reps(1000): glm los hmo white type2 type3, fam(poi)
Optimization
: ML
Deviance
Pearson
=
=
=
=
1495
1490
Scale parameter =
(1/df) Deviance =
(1/df) Pearson =
1
5.464877
6.260391
No. of obs
Residual df
8142.666001
9327.983215
AIC
= 9.276131
Log likelihood
= -6928.907786
BIC
= -2749.057
-----------------------------------------------------------------------|
Observed
Bootstrap
Normal-based
los |
Coef.
Std. Err.
z
P|z|
-------+---------------------------------------------------------------hmo |
white |
type2 |
-.0715493
-.153871
.2216518
.0527641
.0815228
.0536495
-1.36
-1.89
4.13
0.175
0.059
0.000
-.174965
-.3136529
.1165006
.0318664
.0059108
.3268029
type3 |
.7094767
.1178019
6.02
0.000
.4785893
.9403641
_cons |
2.332933
.077869
29.96
0.000
2.180313
2.485554
------------------------------------------------------------------------
106
Standard errors indicate that hmo and white are problematic. Bootstrapping
may be done on parts of a model other than standard errors. With respect to
standard errors, though, bootstrapping has become a popular way of attempting to discover optimal standard errors for model coefficients. In fact, bootstrapping and using robust or empirical standard errors is an excellent way
to determine whether a model is overdispersed, or extradispersed in general:
If the values of bootstrapped or robust standard errors differ substantially from model standard errors, this is evidence that the count model
is extradispersed. Use the bootstrapped or robust standard errors for
reporting your model, but check for reasons why the data are overdispersed and identify an appropriate model to estimate parameters.
A note should be made regarding profile likelihood confidence intervals.
Rs glm function uses them as the default for calculating confidence intervals. Stata has a user-authored logprof command for constructing profile
confidence intervals for logistic regression models only. Recall that I have
said that using the likelihood ratio test (discussed in Section 4.2) for determining the inclusion or exclusion of predictors in a model is preferred over
the standard Wald method, which is another way of saying regular predictor
p-values. The profile likelihood method is based on the likelihood ratio test
but is inverted to move from the p-value to the confidence interval rather than
have a confidence interval and then seek to determine whether it includes 0.
Except in R, the method is rarely used, and it has limited software support.
But it is an attractive method of presenting confidence intervals, and I suspect
that it will be more commonly used in the next decade. I refer you to Hilbe
and Robinson (2013) for a more detailed examination of profile likelihood,
together with R code for its implementation.
3.5 SUMMARY
Overdisperson is likely the foremost problem with count data. Overdispersion also occurs with grouped logistic regression, as well as grouped binomial models as a class. It also is a concern for ordered, partially ordered, and
unordered or multinomial regression models as well. But when a statistician
mentions that he or she is working with overdispersed data, the usual supposition is that they are count data. This is because most count models are
(Poisson) overdispersed (i.e., the variance of the count response variable is
greater than the mean).
3.5 Summary
107
In this chapter, we looked at what overdispersion means and the difference between apparent and real overdispersion. We also discussed various
statistical tests that can be given a Poisson model to determine whether it is
overdispersed or underdispersed. I also provided an overview and code that
can be adapted to the data for determining the relationship between the count
values that are in fact observed and those that are predicted on the basis of
a statistical model. Ideally they should be close. A Chi2 test can be used to
determine how well they fit, but such a test is not as feasible when many of
the counts are skewed far to the right.
Finally, we discusssed strategies for handling overdispersion in particular
light overdispersion. A surprisingly good way to adjust for extradispersion
is to scale the standard errors by the square root of the Pearson dispersion,
which is known as the quasipoisson family in R. This is popular among R
users. Most specialists in count models, however, espouse using robust or
sandwich adjusted standard errors when modeling count data even as a
default. If there is no correlation in the data to be adjusted, the SEs of the
sandwich estimator will be the same as model SEs. Some statisticians prefer
to use bootstrapped SEs in place of sandwich SEs, but bootstrapping takes
longer and the results are typically the same as for the robust or sandwich
approaches.
CHAPTER 4
Assessment of Fit

r How are residuals analyzed for count data? Are they different from those
for logistic models?
r What is a boundary likelihood ratio test? How does it differ from a regular
likelihood ratio test?
r What are information criterion tests? How does one select the most appro-
priate one to use?
r When is it important to use a validation sample? How big should it be?
4.1 ANALYSIS OF RESIDUAL STATISTICS

When modeling, using either full NewtonRaphson maximum likelihood or
IRLS, it is simple to calculate the linear predictor as
x = = + 1 + 1 + + n
or
x = = 0 + 1 + 2 + + n
where or 0 is the intercept term, defined as the value of the linear predictor
of model observations when the value of each predictor is 0. Remember,
however, for continuous or count variables that do not have a 0 value (e.g.,
108
109
TABLE 4.1. Count Model Residual Formulae: Poisson Residuals

(4.1)
Poisson
Rp = (y )/sqrt(V)
(y ) /
(4.2)
Poisson
Rd = sgn(y )*sqrt(deviance)

d
R = sign (y ) 2 y log y (y )
Divide residual by sqrt(1hat), which aims
to make the variance constant. hat = stdp2 * V
Rp
1h
Divide standardized residual by scale, .
Rp
Divide by both standardized and

studentized adjustments; e.g., Rp :
(y ){V()*sqrt(1 h)}
Rp
(1 h)
(4.3)
Pearson
Deviance
Standardized
Poisson
Studentized
Poisson
StandardizedStudentized
Poisson
(4.4)
(4.5)
an age variable ranging from 25 to 64), the intercept will not equal the linear
predictor. In any case, each observation in the model has a linear predictor
value, x or . For members of the GLM family, including Poisson and
negative binomial regressions, a link function converts a linear predictor
to a fitted or predicted value. We have previously seen that for Poisson
models as well as for the traditional negative binomial, = ln(), so that
= exp() or, for full maximum likelihood models, = exp(x). Simply
put, exponentiating the linear predictor produces the fitted, predicted, or
expected value of the count response. The linear predictor and fit are essential
components of all residuals.
The basic or raw residual is defined as the difference between the observed
response and the predicted or fitted response. When y is used to identify the
response, y or is commonly used to characterize the fit. Hence
Raw residual = y y or y or y E(y)
Other standard residuals used in the analysis of count response models
include those in Table 4.1.
In the preceding formulae, we indicated the model variance function as V,
the hat matrix diagonal as hat or h, and the standard error of the prediction
110
ASSESSMENT OF FIT
as stdp. A scale value, , is user defined and is employed based on the type of
data being modeled.
We mentioned earlier that the Anscombe residual (Anscombe 1953) has
values close to those of the standardized deviance. There are times, however,
when this is not the case, and the Anscombe residual performs better than Rd .
Anscombe residuals attempt to normalize the residual so that heterogeneity
in the data, as well as outliers, become easily identifiable.
Anscombe residuals use the model variance function. The variance functions for the three primary count models, as well as the PIG model, are
Poisson
V=
Geometric V = (1 + )
NB2
V = + 2 or (1 + )
# Rs glm.nb uses + (2 ), with = 1
PIG
V = + 3
# some apps use + (3 )
The geometric distribution is the negative binomial with the scale or dispersion parameter, , equal to 1. It is rarely estimated as a geometric model
since true geometric data would have a dispersion parameter value of 1 when
modeled using a negative binomial regression.
Anscombe defined the residual that later became known under his name
as
A (y) A ()
(4.6)
RA =
A () V

here A () = V 1/3 .
The calculated Anscombe residuals for the Poisson model are
Poisson: 3(y2/3 2/3 )/(21/6 )
and for the negative binomial

3
+ y)2/3 (1 + )2/3 + 3 y2/3 2/3
(1
1/6
2 2 +
(4.7)
(4.8)
The Anscombe negative binomial has also been calculated in terms of the
hypergeometrix2F1 function. See Hilbe (1993c) and Hardin and Hilbe (2012)
for a complete discussion.
y2/3 H (2/3, 1/3, 5/3,y/) 2/3 H (2/3, 1/3, 5/3, /)
(4.9)
= 2/3 B(2/3, 2/3){y BI (2/3, 2/3, /)}
(4.10)
111
where H is the hypergeometrix2F1 function, B is the beta function, and BI

is the incomplete beta function. Hilbe (1994a) and Hardin and Hilbe (2012)
show that the two-term beta function has the constant value of 2.05339. is
the negative binomial dispersion parameter.
Analysts generally prefer to graph the standardized Pearson or Anscombe
residuals by . The default residual in R is the deviance. Pearson residuals
may be obtained after a Poisson model of the rwm1984 data as follows. The
model is named pexp.
summary(pexp - glm(docvis ~ outwork + cage, family=poisson,
data=rwm1984))
presid - residuals(pexp, type="pearson")
The Pearson Chi2 statistic is calculated as the sum of the squared Pearson
residuals. Put in one line, we have
pchi2 - sum(residuals(pexp, type="pearson")2)
# Pearson Chi2
What are we looking for in graphing residuals for count models? We look for
two things:
r evidence of poor fit, and
r nonrandom patterns.
We can evaluate these two goals by graphing or plotting the standardized

deviance or Anscombe residual by using
r the predicted or fitted value, .
Patterns usually indicate overdispersion and/or misspecification. An alternative count model may be required:
r all model predictors.
Patterns typically mean that observations are not independent, or perhaps

proneness exists in the data. It may also indicate that one or more predictors
need to be converted to another scale (e.g., squared or logged). Finally, a
smoother may need to be added to the model terms:
r predictors we found not to contribute to the model.
Try including the excluded predictors, but they may need rescaling or are
part of an interaction term:
r a time variable (for longitudinal and time series count models).
112
ASSESSMENT OF FIT
Independence is violated. Use a GEE or mixture model:

summary(rwm - glm(docvis ~ outwork + age, family=poisson,
data=rwm1984))
output not displayed
P__disp(rwm)
Pearson Chi2 =
Dispersion
=
43909.62
11.34322
mu - predict(rwm)
grd - par(mfrow = c(2,2))
plot(x=mu, y= rwm$docvis, main = "Response residuals")
plot(x=mu, y= presid, main = "Pearson residuals")
Figures not displayed
4.2 LIKELIHOOD RATIO TEST

We mentioned the likelihood ratio test earlier in the book. It is a key test
for assessing the worth of nested models (i.e., where a model with fewer
predictors is compared with the same model with more predictors). The test
evaluates whether the predictors withdrawn from a model should in fact have
been retained. Likelihood ratio tests also are used to compare different models
if one is a subset or reduced version of another. For example, one may use
a likelihood ratio test to determine whether data should be modeled using a
Poisson or negative binomial regression. This is a crude way of expressing
the relationship, but it is how most analysts think of it. We use what has been
termed a boundary likelihood ratio test for testing the Poisson model versus
the negative binomial model (see Hilbe 2007a, 2011).
4.2.1 Standard Likelihood Ratio Test

The traditional likelihood ratio test is defined as
LR = 2(L R L F )
(4.11)
where L F is the log-likelihood for a full or more complete model and L R is

the log-likelihood for a reduced model. An example will help.
We use the German health data, with both outwork and age as predictors:
. use rwm1984,clear
. qui glm docvis outwork age, fam(poi)
. est store A
// full model
113
. qui glm docvis outwork, fam(poi)

. est store B
. lrtest A B
// reduced model, drop age
LR chi2(1) =
Prob chi2 =
Likelihood-ratio test
(Assumption: B nested in A)
715.98
0.0000
The test confirms that age is a significant predictor in the model and should
be retained. The likelihood ratio drop1 test is a useful likelihood ratio test
in which one predictor at a time is dropped and the models are checked
in turn for comparative goodness-of-fit. In Stata, a user-developed command
(Wang 2000) called lrdrop1 can be used following logit, logistic, and
poisson to find the predictors that together best fit the model. lrdrop1 can
rather easily be adapted for use with other regression models. It is particularly
useful when a model has quite a few potential predictors. lrdrop1 must be
installed using the command .ssc install lrdrop1 in order to use it
the first time:
STATA OUTPUT
. qui poisson docvis outwork age
. lrdrop1
Likelihood Ratio Tests: drop 1 term
poisson regression
number of obs = 3874
---------------------------------------------------------------------docvis
Df
Chi2
PChi2
-2*log ll
Res. Df
AIC
---------------------------------------------------------------------Original Model
-outwork
1
464.77
0.0000
31272.78
31737.55
3871
3870
31278.78
31741.55
-age
1
715.98
0.0000
31988.76
3870
31992.76
---------------------------------------------------------------------Terms dropped one at a time in turn.
R users are familiar with both lrtest and especially drop1 (see Table 4.2).
The latter uses the deviance statistic rather than the log-likelihood as the basis
for model comparison. Recall that the deviance is itself derived as a variety
of likelihood ratio test and is defined as 2{LLs LLm}, where LLm is the
log-likelihood of the model and LLs is the saturated log-likelihood. For LLs,
the response term, y, is substituted for each in the log-likelihood equation.
The p-value of 2.2e-16 indicates that outwork and age are significant predictors in the model.
The drop1 test found in R is a likelihood ratio test of each nested predictor
in a model. Deviance and AIC statistics are produced for each alternative.
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ASSESSMENT OF FIT
TABLE 4.2. R: Likelihood Ratio Test

===========================================================
library(COUNT); library(lmtest); data(rwm5yr)
poi1 - glm(docvis ~ outwork + age, family=poisson, data=rwm1984)
poi1a - glm(docvis ~ outwork, family=poisson, data=rwm1984)
lrtest(poi1, poi1a)
drop1(poi1, test="Chisq")
===========================================================
R OUTPUT
Likelihood ratio test
Model 1: docvis ~ outwork + age
Model 2: docvis ~ outwork
#Df LogLik Df
Chisq Pr(Chisq)
3 -15636
2 -15994 -1 715.98
2.2e-16 ***
--Signif. codes:
0 `*** 0.001 `** 0.01 `* 0.05 `. 0.1 ` 1
drop1(poi1,test="Chisq")
Single term deletions
Model:
docvis ~ outwork + age
Df Deviance
none
AIC
LRT
Pr(Chi)
24190 31279
outwork
24655 31742 464.77 2.2e-16 ***
age
24906 31993 715.98 2.2e-16 ***
--Signif. codes:
0 `*** 0.001 `** 0.01 `* 0.05 `. 0.1 ` 1
The test is used by many analysts as a substitute for the standard likelihood
ratio test.
For the purposes of modeling counts, the foremost use of the test is when
it is used as a boundary test.
4.2.2 Boundary Likelihood Ratio Test

The boundary likelihood ratio (BLR) test is a test used on negative binomial
models to determine whether the value of the dispersion parameter, , is
115
significantly different from 0. We will discuss the negative binomial model

in the next chapter, so I do not want to go into detail here.
It is important, though, to remember that the BLR test has a lower limiting
case for the value of , which is what is being tested. Given that the standard
parameterization of the negative binomial variance function is + 2 , when
= 0, the variance reduces to . The Poisson variance function is , the
same as its mean value.
The BLR equation is given as
2(L P LNB )
(4.12)
with L symbolizing the log-likelihood function. The resulting value is measured by an upper tail Chi2 distribution with one (1) degree of freedom.
Since the distribution being tested can go no lower than 0, that is the boundary. Only one half of the full distribution is used. Therefore the Chi2 test
is divided by 2. For a standard Chi2 test with no boundary, with one
degree of freedom, a BLR test statistic of 3.84 is at the .05 significance
level:
. di chi2tail(1,3.84)
.05004352
Dividing by 2 means that a value over 2.705 is not significant:

. di chi2tail(1,2.705)/2
.05001704
In R, the pchisq function must be used, giving the following result:

pchisq(2.705,1, lower.tail=FALSE)/2
[1] 0.05001704
As a key to remember, given the value of 2 times the difference in loglikelihood values, if the difference in Poisson and negative binomial loglikelihoods is less than 1.352, the model is Poisson; if it is greater, the data
need to be modeled other than Poisson presumably negative binomial.
We will discover that there are quite a few count models that are nested
within another, for which a likelihood ratio test is appropriate (e.g., zerotruncated Poisson and zero-truncated negative binomial, censored Poisson
and censored negative binomial).
116
ASSESSMENT OF FIT
4.3 MODEL SELECTION CRITERIA

4.3.1 Akaike Information Criterion
The Akaike Information Criterion (AIC) was the creation of Japanese statistician Hirotsugu Akaike (1973). However, the AIC statistic did not begin
to have widespread use until the twenty-first century. Actually, Akaike later
developed what he considered to be a superior statistic, called the ABIC, but
it has not gained acceptance by the greater research community. The AIC is
the most commonly used general fit statistic.
The AIC statistic is generally found in two forms, the traditional version
AIC = 2L + 2k = 2 (L k)
(4.13)
and the version with the main AIC terms divided by n, the number of observations in the model
AIC =
2L + 2k
= 2 (L k)/n
n
(4.14)
where L is the model log-likelihood, k is the number of predictors, including

the intercept, and n the number of observations in the model. 2k is referred
to as a penalty term, which adjusts for the dimension of the model. Given
that adding more parameters to a model makes the data more likely, as we
increase the number of predictors, 2L becomes smaller. The penalty, 2k, is
added to the log-likelihood to adjust for this possible bias.
Larger n also affects the 2L statistic. Equation (4.14) divides the main
terms in the AIC by n, which makes the AIC/n a per-observation contribution
to the adjusted 2L. All other conditions being equal, when comparing models, the better-fitted model has a smaller AIC statistic. There is no difference
in this respect between equations (4.13) and (4.14).
R (default package) and Stata adopt equation (4.13) as the primary definition of AIC, assuming that both equations (4.13) and (4.14) have the same
inherent information (i.e., both provide equal assessments regarding comparative model fit). However, this is not necessarily the case, especially when
the statistic is used for assessing the fit of models whose observations are
not independent, or when the statistic is used to compare models of different sizes, which can happen with nested models where one or more of the
predictors have missing values. The AIC is also used by some analysts to
compare models of different sample size. Although the AIC test can be used
117
on nonnested models, the response variable of models being compared must

be the same.
The analyst must be cautioned to be aware of which meaning or definition
of AIC is being used in reporting a study. In general, low values of AIC
compared with the number of model observations indicate that equation
(4.14) is being used; large values indicate equation (4.13).
Other AIC statistics have been used in research. The most popular other
than the two primary versions given here is the finite sample AIC, which
may be defined as
AICFS = 2{L k k(k + 1)/(n k 1)}/n
(4.15)
or
2k (k + 1)
(4.16)
nk1
where k is the number of parameters in the model. This statistic has also
been referred to as AICC for AIC-corrected, but I will use that designation for
equation (4.18). Note that AICFS has a greater penalty for additional parameters compared with the standard AIC statistic. Note also that AICFS AIC
for models with large numbers of observations. Hurvich and Tsai (1989) first
developed the finite-sample AIC for use with time series and autocorrelated
data; however, others have considered it preferable to the AIC for models
with noncorrelated data as well, particularly for models with many parameters, and/or for models with comparatively few observations. When used for
longitudinal and time series data, the n in equation (4.16) is summed across
panels, iN n i . A variety of finite-sample AIC statistics have been designed
since 1989.
A Consistent Akaike Information Criterion (CAIC) test and Corrected AIC
have also enjoyed some popularity. Defined as
AICFS = AIC +
CAIC = 2L + k log(n)
(4.17)
and
2 kn
(4.18)
nk1
these tests are sometimes found in commercial statistical software, such as
the AICC in SAS. It is wise to be aware of their existence and meaning since
you will find them being used in journal articles and books on modeling.
Recently, the AIC statistic and alternatives have been the focus of considerable journal article research, particularly with respect to correlated data. Hin
AICC = 2L +
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ASSESSMENT OF FIT
and Wang (2008) and Barnett et al. (2010) even demonstrated that the AIC
is superior to the QIC statistic, which is an AIC-type fit statistic designed for
generalized estimating equation (GEE) longitudinal models by Pan (2001)
and revised by Hardin and Hilbe (2002). The QIC statistic has itself been
revised in light of these objections, most recently by Hardin and Hilbe (2013)
and Shults and Hilbe (2014). These applications are for longitudinal data, or
data structured in panels.
The traditional AIC statistic can be enhanced to provide a superior general comparative-fit test for maximum likelihood models. Simulation tests
performed by Hardin and Hilbe (2013) appear to confirm that the following
version of AIC, which we may tentatively call AICH , produces a test statistic
that is aimed at optimally selecting the best fitted among competing maximum
likelihood models. The statistic is robust to violations of MLE assumptions,
such as the requirement of the independence of observations. There are three
adjusters in the statistic the number of observations in the model, number
of parameters (coefficients), and number of distributional parameters for
example, the mean or location and scale parameters. In special circumstances,
a scale parameter can become a dispersion parameter:
AICH = 2L +
4( p 2 pk 2 p)( p + k + 1)( p + k + 2)
n pk2
(4.19)
with
n = number of observations in the model;
p = number of slopes in the model;
k = number of model location and scale parameters.
This test statistic is still a work in progress but appears to correctly select the
best fitted among competing maximum likelihood estimated models. I will
show the results of using it together with other more traditional versions in
subsequent example model output.
Lets return to the traditional AIC statistic currently provided in the majority of study results. How do we decide whether one value of the AIC is
significantly superior to another; that is, whether there is a statistically significant difference between two values of the AIC? Hilbe (2009a) devised a table
based on simulation studies that can assist in deciding whether the difference
between two AIC statistic values is significant. Table 4.3 is taken from that
source and is based on equation (4.13) (i.e., the AIC without division by n).
119
TABLE 4.3. AIC Significance Levels

Difference between
Result if
Models A and B
A B
---------------------------------------------0.0 & = 2.5
No difference in models
2.5 & = 6.0
6.0 & = 9.0
9.0
Prefer A if n 256
Prefer A if n 64
Prefer A
Table 4.3 is a general guide only and should be used as an approximation.

An example of AIC and BIC statistics will be given in the following subsection.
If a difference does not fit into one of the preceding categories, then there is
no preference between the alternative models.
4.3.2 Bayesian Information Criterion

The Bayesian Information Criterion (BIC) was first formulated by Gideon
Schwarz in 1978. It is the second foremost contemporary comparative-fit
statistic for maximum likelihood models found in both commercial statistical
packages and freeware, such as R. The procedure is at times known by different names (e.g., the Schwarz Criterion, or simply SC in SAS). It is formulated
as
BICL = 2L + k log(n)
(4.20)
with k indicating the number of predictors, including the intercept, and n the
number of observations in the model. The statistic gives a higher weight to
the adjustment term, k*log(n), than does the AIC statistic, where only 2k is
employed for adjusting 2 times the model log-likelihood function. It is on
this account that many statisticians prefer the Schwarz BIC to the traditional
AIC, but in general the AIC is used more frequently by analysts when testing
and reporting research studies.
Another parameterization of the BIC, which is used in the Limdep software
program, was developed by Hannan and Quinn (1979). It is given as
BICHQ = 2(L k ln(k))/n
(4.21)
120
ASSESSMENT OF FIT
TABLE 4.4. R: Version of Stata User Command abic

===========================================================
modelfit - function(x) {
obs - x$df.null + 1
aic - x$aic
xvars - x$rank
rdof - x$df.residual
aic_n - aic/obs
ll - xvars - aic/2
bic_r - x$deviance - (rdof * log(obs))
bic_l - -2*ll + xvars * log(obs)
bic_qh - -2*(ll - xvars * log(xvars))/obs
c(AICn=aic_n, AIC=aic, BICqh=bic_qh, BICl=bic_l)
}
modelfit(x) # substitute fitted model name for x
===========================================================
library(COUNT)
data(medpar)
mymodel - glm(los ~ hmo + white + factor(type), family=poisson, data=medpar)
modelfit(mymodel)
not diisplayed
which has results that approximate AIC/n in equation (4.14) for most models.
If the values differ substantially, this is an indication that the model is poorly
fit and is likely misspecified. This test is not definitive, though, since many
poorly fit models have similar AIC/n and BICHQ values. Many statisticians,
including the author, prefer the use of BICHQ to the Schwarz parameterization.
The Stata abic command and the R modelfit function (in the COUNT
package) display the values of the most used parameterizations of the AIC and
BIC statistics. The BIC statistic given in the lower-left corner of the output
is BICHQ , whereas the lower-right BIC statistic is BICSC , or Schwarz BIC.
The top-left AIC is equation (4.14) and the top right is equation (4.13). The
way that the labeling reads is that the AIC by default is (4.13). Multiplying
equation (4.13) by n yields equation (4.14). Rs modelfit.r function is
provided in Table 4.4. The AICH command was added during the writing of
this book and is displayed in selected model output.
121
An example will perhaps help clarify things. Using the medpar data, we
model and use the abich (abic + AICH ) and modelfit statistics for Stata
and R output, respectively:
. glm los hmo white type2 type3, fam(poi) nolog nohead
-----------------------------------------------------------------------|
OIM
los |
Coef.
Std. Err.
z
P|z|
-------+---------------------------------------------------------------hmo | -.0715493
.023944
-2.99
0.003
-.1184786
-.02462
white |
-.153871
.0274128
-5.61
0.000
-.2075991
-.100143
type2 |
type3 |
_cons |
.2216518
.7094767
2.332933
.0210519
.026136
.0272082
10.53
27.15
85.74
0.000
0.000
0.000
.1803908
.6582512
2.279606
.2629127
.7607022
2.38626
-----------------------------------------------------------------------. abich
AIC Statistic
=
9.276131
AIC*n
= 13867.815
BIC Statistic
AICH Statistic
=
=
9.280208
9.274205
BIC(Stata) = 13894.365
AICH*n
= 13854.255
Statas estat ic command is commonly used by Stata users to

obtain AIC/BIC statistics after modeling maximum likelihood and GLM
models:
. estat ic
-----------------------------------------------------------------------Model |
Obs
ll(null)
ll(model)
df
AIC
BIC
--------+--------------------------------------------------------------. |
1495
.
-6928.908
5
13867.82
13894.36
------------------------------------------------------------------------
Note that in the Stata glm command output the BIC statistic displayed in
the header statistics is commonly referred to as the Raftery BIC, authored in
1986 by Adrian Raftery of the University of Washington. It is based on the
deviance function, not the log-likelihood as are other AIC and BIC statistics.
The reason for this is Rafterys desire to implement an information criterion
fit test for generalized linear models, which were at the time all based on
the deviance, with the log-likelihood rarely even calculated. Rafterys BIC is
seldom used at this time. I wrote Statas initial glm command in late 1992,
when the deviance was still used as the basic fit test in GLM softare, as
122
ASSESSMENT OF FIT
well as the criterion for convergence. The Raftery BIC test statistic is defined
as
BICR = D (d f ) ln(n)
(4.22)
bic - model$deviance - (model$df.residual * log(model$df.null +1))
The AIC and BIC statistics are now considered as basic fit tests and should normally accompany statistical model output. The traditional AIC and Schwarz
BIC are assumed when a reference is made to AIC and BIC statistics. If you
select another definition, be certain to mention it in a research report.
4.4 SETTING UP AND USING A VALIDATION SAMPLE

Analysts commonly use a validation data set to help confirm the generalizability of the model they are developing to a greater population. This is
particularly the situation when the data come from a sample of observations
within a known population. This concept of extractability is inherent in the
frequency interpretation of statistics, on which the models we are discussing
are based.
Validation data generally come in two varieties: (1) as a sample of population data from which the model data derive but that are not included in the
model and (2) a sample taken from the model itself. Percentages differ, but
validation samples typically consist of about 20% of the observations from
the model being examined however, there is no hard rule as to the actual
percentage used. If validation data are taken from the estimated model, the
procedure is to model the validation data in exactly the same manner as in the
original model. The validation model coefficients and standard errors should
be similar to those produced by the original model. A Hausman test (Hausman 1978) on the equality of coefficients can be used to assess the statistical
difference in the two groups of observations.
A given percentage of data may also be withheld from the estimation of
the initial or primary model. Once the selected data have been modeled, the
withheld validation data are subsequently modeled for comparison purposes.
Using a test like Hausmans, the coefficients are tested for similarity. If it
appears that the two sets of data come from the same population that the
data are not statistically different then the two sets of data may be combined
and remodeled for a final fitted model.
123
Both of these methods of constructing and implementing a validation sample help prevent an analyst from developing an overfitted model. Overfitted
models are such that they cannot be used for classification, or for prediction of nonmodel data from a greater population. An overfitted model is so
well fitted that it is applicable only to the data being modeled. Coefficient
values and other summary statistics may not be extrapolated to other data.
For most research situations, such a model is of little value. Unfortunately,
though, many analysts attempt to fit a model as perfectly as possible so that
overfitting does become a problem.
It is easy to overfit a model. When an analyst incorporates a large number
of predictors into the model and then attempts to fine-tune it with highly
specific transformations and statistical manipulations, it is likely that the
resultant model is overfitted. Testing a model against validation data assists
in minimizing this possibility and helps assure us of the stability of the
parameter estimates.
Remember that even if we are confident that a model is well fitted, it is
nevertheless dangerous to make predictions outside the sample space of the
model. If the modeled data are truly representative of the population on which
the modeled data is a sample, it is safer to make out-of-sample predictions,
but its not wise to make them too far from the models sample space.
How far is too far? Let experience and common sense be a guide. Statistics
is in many respects an art, not simply a recipe to be followed.
4.5 SUMMARY AND AN OVERVIEW OF THE MODELING PROCESS

Chapter 2 and 3 are the longest of the book, with Chapter 3 the longer.
The reason for such lengthy chapters is the fact that the Poisson model rests
at the base of all other count models. Chapter 3 deals with the foremost
problem that must be addressed when modeling counts overdispersion. We
described what overdispersion entails, how to test for it, how to handle it,
and how to assess the fit of count models in general. In particular, the Poisson
model is used for the example regression model for these tests. For the most
part, tests like the likelihood ratio test, the AIC and BIC statistics, and so forth
are applicable to many of the models we discuss in the remainder of the book.
However, keep in mind that AIC/BIC type statistics assume that observations
are independent in a model. This is not always the case. They are fairly robust
to violations of these assumptions, though. Many analysts still use the tests,
even for random-effects models and other models that are plainly correlated.
124
ASSESSMENT OF FIT
When used in these circumstances, the information criterion tests (AIC, BIC,
etc.) are likely valid indicators of which model is better fit, but only if there
is a wide separation in AIC/BIC values between the models being compared.
I caution you not to rely solely on them for assessing comparative model fit
when the data are clearly correlated.
When modeling, it is important to mention that analysts should not focus
on predictor p-values. Rather, emphasis should be given to confidence intervals. Moreover, unless the distributional assumptions of the model are met in
full, it is preferred to employ robust or sandwich-based confidence intervals.
Profile and bootstrapped confidence intervals are also preferred. If the lower
and upper 95% confidence limits of a coefficient exclude 0, or if a risk ratio
excludes 1, we may be 95% confident that the true value of the coefficient or
risk ratio lies somewhere within the confidence limits.
A predictor p-value relates to the value of the predictor z-statistic, which
itself is the ratio of the coefficient to the standard error. It is not the probability
that the predictor fits the model, or of how influential a predictor is in the
model. Unfortunately many analysts interpret a p-value in this manner. A
more full discussion of p-values and confidence intervals takes us beyond the
scope of this guidebook. I refer you to Vickers (2010) and Ellis (2010) for
more details. It is advised, though, to give preference to confidence intervals
when considering a predictors worth to a model.
At this point, we start our examination of models that extend the base
Poisson model. Most are designed to adjust for overdispersion in general,
whereas others adjust for a specific distributional abnormality. Several models
we discuss are also capable of adjusting for underdispersion.
First, however, I would like to provide a summary of what we have thus
far discussed regarding the modeling process.
4.5.1 Summary of What We Have Thus Far Discussed

As a general approach to modeling count data, lets review a bit how to start
the modeling process. I assume you have looked carefully at the data. For
binary variables, check to see whether one of the levels has only a small
percentage of the observations or there are missing values. For categorical
variables, check to see whether one or more levels are markedly unbalanced,
with too many or too few observations.The more balanced the predictor, the
better the model that can be developed. For continuous predictors, check
the range the minimum and maximum values and whether the mean
125
and median are nearly the same. If they are, the variable may be normally
distributed (i.e., bell shaped). If a continuous variable such as age begins at
40 and ends at 65, it is likely best to center it. This means that the variable, as
a predictor in a model, will be interpreted differently from normal. Check also
for outliers and missing values. This is all preliminary to actually modeling
the data.
For count models such as Poisson or negative binomial regression, I suggest
using robust standard errors as a default method. If there is no excessive
correlation in the data, the robust standard errors will reduce to the values
of model standard errors. If there is correlation in the data, which is typically
the case, then the robust standard errors help adjust for the extradispersion.
Bootstrapping does the same thing but takes longer, and the results are nearly
identical.
If overdispersion is not adjusted by simple post hoc standard error adjustment, the majority of analysts turn to negative binomial regression. Of course,
if ones study data are structured such that no zero (0) counts are allowed, or if
there are far more zero (0) counts than allowed by the distributional assumptions of the Poisson model, then using a zero-truncated or zero-inflated Poisson model might be the preferred approach. Well discuss this scenario later.
On the other hand, if an analyst is not sure of the cause of model overdispersion, a good procedure is to model the data using a negative binomial model,
testing it using a boundary likelihood ratio test. There are other options as
well, but this is a good start.
To reiterate, we next address a model that can be used for generic overdispersion one for which we may not know the source of extra correlation in
the data. Of course, for the example rwm1984 data we have been modeling,
I strongly suspect that the excessive zero counts found in the data result in
overdispersion. For the medpar data, the response term, los, has no possibility of having zero counts. That situation also gives rise to overdispersion
but for a different reason. Remember also that a model may have multiple sources of overdispersion. Adjusting for one source will seldom adjust
for other sources. For now, however, we will overlook these facts and will
assume that we have no idea why our example models are overdispersed.
CHAPTER 5
Negative Binomial
Regression

r How does the negative binomial model differ from the Poisson model?
r What is the difference between NB2 and NB1 models? Which is the tradi-
tional version? Why?
r What are the assumptions of the negative binomial model?

r What is the difference between the dispersion statistic and parameter? How
do they relate?
r What is NB-P, and how can it help select the best fit between NB1 and
NB2 models?
r Can the dispersion parameter also be parameterized a heterogeneous
negative binomial?
5.1 VARIETIES OF NEGATIVE BINOMIAL MODELS

I have mentioned several times thus far in our discussion that the standard
or traditional understanding of negative binomial regression is as a Poissongamma distribution mixture model with a mean of and a variance of
+ 2 or (1 + ). The mean is understood in the same manner as the
Poisson mean, but the variance has a much wider scope than is allowed by
the Poisson distribution.
126
5.1 Varieties of Negative Binomial Models
127
The traditional parameterization of the negative binomial, as given in the

previous paragraph, is also known as the NB2 negative binomial model, based
on the value of the exponent in its second term. The NB2 model is also referred
to as a quadratic negative binomial. An NB1 model has also been formulated
for which the second terms exponent has a value of 1. It is a linear negative
binomial, with a mean of and a variance of + . Both NB1 and NB2
use a maximum likelihood algorithm for estimating parameters, but NB2 may
also be estimated using an IRLS algorithm within the scope of generalized
linear models.
The negative binomial is a two-parameter model with mean () and
dispersion () parameters. How then can the negative binomial be a GLM,
which is based on one-parameter models from the exponential family of
distributions? Simply enter the dispersion parameter as a constant. Stata,
SAS, and R each model the negative binomial as a GLM but estimate the
dispersion parameter in a subroutine outside the GLM algorithm, inserting
the result back into the IRLS algorithm as if it had been estimated as a GLM.
This is a very nice maneuver. All three software applications, however, as well
as SPSS, optionally allow users to specify a value for the dispersion if they
wish. Statas nbreg automatically estimates the dispersion.
Count data are often found that cannot have zero counts (e.g., hospital
length of stay data). However, an analyst is more likely to have data with
more zeros than are allowed by Poisson or negative binomial distributional
assumptions. Zero-truncated and zero-inflated models have been designed
for this purpose. Both negative binomial and Poisson data can be truncated
to the left, right, or somewhere in the middle of a distribution of counts.
General truncated models exist to adjust the Poisson and negative binomial
models for the truncation. Adjustment means that the PDF is amended so
that even with an alteration in the original data, the probabilities of the
individual component observations in the distribution still sum to one (1).
These models, plus the other models that will be examined in the remainder
of the book, are all based on some form of the Poisson, some mixture of
the Poisson, or an extension of some mixture of Poisson and other GLM
distributions.
Finally, I should mention the existence of the canonical negative binomial.
This model directly derives from the negative binomial PDF. The traditional
NB2 negative binomial does not; neither do the other negative binomial
models we discuss.
A canonical regression model is nearly always considered a GLM model
for which the link and variance functions derive directly from the PDF of the
128
NEGATIVE BINOMIAL REGRESSION
model. For the Poisson PDF, the exponential form of the log-likelihood is
equation (1.14):
n

yi log (i ) i log(yi !)
L (; y) =
i=1
-------link
------cumulant
---------normalization
Recall that the exponential family form for count models is {y b()
c(.)}, where y is the response count variable being modeled, is the link, b()
the cumulant, and c(.) the normalization term, which guarantees that the
distribution sums to 1. For the Poisson model, the canonical link is log()
and the cumulant . The first derivative of the cumulant with respect to
is the mean; the second derivative is the variance. For the Poisson, the
result is for both the first and second derivatives with respect to . This is
solved using the chain rule in calculus. Because the Poisson link is log(),
it is the canonical function. For the traditional NB2 negative binomial, the
link is also log(). We want that to be the case so that it can properly model
overdispersed Poisson data.
I refer you to equation (5.2), which is the negative binomial log-likelihood
function in exponential family form. The canonical link is log(/(1 + )),
which clearly is not log(). Given the fact that the NB2 negative binomial
is a noncanonical model, its standard errors are based on what are called
the expected information matrix (EIM). Standard errors of canonical models
are based on the observed information matrix (OIM). Standard errors from the
OIM are more accurate than those from the EIM when a model has less than
30 observations. Note that because of this problem, the Stata glm command
and SAS Genmod procedure by default estimate noncanonical models using
OIM but allow an option to estimate a model using EIM, or a combination
of both. See Hilbe (2011) for a complete discussion of OIM, EIM, and their
relationship. Also see the same source for a discussion on the canonical
negative binomial. It is to my knowledge the only source on the subject. Our
discussion has taken us into the topic of the following section, to which we
now turn.
5.2 NEGATIVE BINOMIAL MODEL ASSUMPTIONS

The traditional negative binomial model, NB2, has the same distributional
assumptions as the Poisson distribution, with the exception that it has a
129
TABLE 5.1. Mean Dispersion Variance Relationships

M
(1 + )
(1 + )
.5
.5
.5
.5
1
1
1
1
.5
1
2
5
.5
1
2
5
0.625
0.75
1.0
1.75
1.5
2.0
3.0
6.0
5
5
5
5
10
10
10
10
.5
1
2
5
.5
1
2
5
17.5
30
55
130
60
110
210
510
second parameter the dispersion parameter which provides for a wider

shape to the distribution of counts than is allowed under Poisson assumptions. The Poisson assumption of equidispersion means that the values of the
mean and variance are the same. For the NB2 negative binomial, two parameters affect the variance over that of the mean the dispersion parameter ()
and square of the mean (2 ). With greater values of the negative binomial
mean come much greater values of the variance. Table 5.1 provides comparative values of the negative binomial mean and variance. Observe how fast
the variance increases with increases in the mean. Recall that, for the Poisson
distribution, mean = variance ( = ):
The negative binomial allows us to model a far wider range of variability
than the Poisson.
The negative binomial distribution can be mathematically derived from the
binomial distribution, as well as from the geometric and from a mixture of
the Poisson and gamma distributions. For the purpose of statistical modeling,
it is the Poisson-gamma mixture interpretation that is predominant.
The negative binomal model is nearly always used to estimate the parameters of overdispersed Poisson data. As mentioned earlier, there are two
primary parameterizations of the negative binomial distribution that have
been used for this purpose. The first is the standard parameterization, which
has a variance function of + 2 or (1 + ). The second parameterizaton, termed NB1 or the linear negative binomial model, has a variance of
+ or (1 + ). We discussed the NB1 briefly when examining the
quasi-likelihood Poisson model, which has a variance defined as . The
130
NB1 is similar to the quasi-likelihood Poisson in that can take the term
1. The difference, however, is that, for the NB1 model, is estimated
as a second parameter as is the NB2 negative binomial. It is not a constant.
If it were, the model would be quasi-likelihood. It is important to remember,
though, that statisticians also use the term quasi-likelihood when referring
to a GLM model that does not specifically derive from an underlying probability function. Poisson or negative binomial models with scaled or robust
standard errors, for example, are also referred to as quasi-likelihood models
since the standard errors are not directly based on the second derivative of the
model log-likelihood, which are called model standard errors. The use of
the term quasi-likelihood in a specific situation must relate to the context
in which it is being applied.
Our attention now will focus on the NB2 negative binomial since it is
by far the most widespread understanding of negative binomial regression.
The negative binomial probability distribution function and associated loglikelihood function are considerably more complex than the Poisson. The
probability distribution can be expressed in a variety of ways, with a common
parameterization appearing as

f (y; , ) =
yi +
1
1
1
1
1
1 + i
1
i
1 + i
yi
(5.1)
The log-likelihood functions can be given in both and exponential mean

formats:

n

1
i
1
log (1 + i ) + log yi +
yi log
L (; y, ) =
1
+
i
i=1

1
(5.2)
log (yi + 1) log
L(; y, ) =

exp(xi )
1
log 1 + exp(xi )

1 + exp(xi )
i=1

1
1
log (yi + 1) log
(5.3)
+ log yi +
n
yi log
In both forms of log-likelihood, there are three terms with a log-gamma

function, all from the normalization term, which is the first term of the PDF.
Note that they do not include the mean parameter, , or exp(x), as part of
131
their definition, but do include the dispersion parameter, , which is to be

estimated as well as the mean.
When the negative binomial is estimated using a full maximum likelihood
algorithm, both and the dispersion parameter are estimated. When estimated using a generalized linear model algorithm, only is estimated;
must be inserted into the algorithm as a constant. Statas glm, Rs glm, and
SASs Genmod procedures all allow the user to provide a value for the negative binomial dispersion parameter. The user can experiment, finding a value
that results in the negative binomial dispersion statistic being as close to 1.0
as possible. This value is the correct value of the dispersion parameter, but
the method is tedious. glm and Genmod provide an option that calculates
maximum likelihood estimates of in a subroutine, returning the value to
the main estimating algorithm as a constant. The result is that both GLM procedures can produce full maximum likelihood estimates of the coefficients
and of . The developers of Rs glm function did not provide such capability,
but a function called nb.glm was authored that calculates the dispersion
parameter in the same manner as glm and Genmod. The caveat, though, is
that the developers of nb.glm parameterize the dispersion parameter in a
manner different from that used in Stata, SAS, SPSS, Limdep, and other major
software. It estimates (theta, not the location parameter or link function
meaning of discussed earlier), defined as
= 1/
Every instance of in equations (4.1)(4.3) is inverted.
When the value of approaches 0, the model is Poisson. For , when
approaches infinity, the model is Poisson. The meaning of entails that it
has lower values as there is greater variation in the data. As approaches
0, the more correlation there is in the data. As approaches infinity, the
data are more Poisson. Users of R must be careful in how they understand
the glm.nb dispersion parameter since it is the inverse of . I will use the
standard direct parameterization of the negative binomial dispersion parmeter ()
when discussing count models unless specifically indicated otherwise. Note that
R functions exist that estimate rather than ; for example, the nbinomial
function available in the msme and COUNT packages. We discuss this later.
When a Poisson model is overdispersed, the Poisson dispersion statistic,
Pearson Chi2/(nr), is greater than 1, and the negative binomial value of is
greater than 0. A true Poisson model has a Poisson dispersion statistic of 1 and
negative binomial dispersion parameter of 0. Repeating from earlier, division
by zero prohibits from having a zero value in the negative binomial PDF or
132
POISSON : UNIFORM
---------------------------------------------------------------------------------------------|
|
|
|
|
|
|
|
|
|
|
|
|
|
| events enter cell in a random
|
|
|__ _ |
|
| |
| uniform manner
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
----------------------------------------------------------------------------------------------
FIGURE 5.1. How events can enter or exist within panels of areas or time periods for the
Poisson distribution.
in the log-likelihood. However, can approach 0 (e.g., 0.00001), depending

on the software. There is not a one-to-one linear relationship between the
Poisson dispersion statistic and negative binomial dispersion parameter. The
relationship varies depending on the number and type of predictors, as well
as extradispersion. But the relationship is still a positive one.
Finally, recall that in Section 2.6 I explained that, for the Poisson distribution, events enter or exist independently and uniformly within given
areas, spaces, or time periods. That is, the events being counted in areas
and time periods are described by the uniform distribution. Although this
situation does occur in the real world at times, the usual situation is that
events occur in nonuniform ways. The negative binomial distribution, as a
Poisson-gamma mixture, assumes that events entering into areas or periods
are best described according to a gamma distribution. Since uniformly distributed counts of events are equidispersed where the mean and variance
are the same events entering such areas or periods in nonuniform ways are
extradispersed. More often, they are overdispersed. The negative binomial
model is a general statistical method that can be used to adjust a count model
for overdispersion.
Figures 5.1 and 5.2 give a pictorial view as to how events can enter or
exist within panels of areas or time periods. For the Poisson distribution,
events are independent and are uniformly entered into each panel or cell. For
NEGATIVE BINOMIAL: POISSON-GAMMA

-------------------------------------------------------------------------------------------------------|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|_ __ |
|

| |
|
|
|
|
|
|
|
|
|
|
|
|
|
---------------------------------------------------------------------------------------------------------
|
| events enter cell in
| with the same gamma
| shape each cell
|
FIGURE 5.2. Same information as in Figure 5.1, but for the negative binomial distribution.
133
the negative binomial distribution, events occur with a gamma distribution,

which is very pliable in the range of shapes it can take. The caveat, however,
is that each panel has the same shape (should be drawn to have the same
shape). In real life, events are associated with panels in different ways. To
model this situation, a simple negative binomial model will not be sufficient.
A third parameter may be necessary to describe how a shape even a gamma
shape changes across panels. To adjust for such a situation, an adjustment
to the model standard errors must be made. Most statisticians recommend
that robust or empirical standard errors be employed in the presence of
heterogeneity or variation in excess of what can be accommodated using
standard negative binomial techniques. In fact, I can give this advice:
Unless your Poisson or negative binomial model is well fitted and
meets its respective distributional assumptions, use robust or empirical
standard errors as a default.
To summarize, the assumptions we make for using a negative binomial (NB2)
model are as follows:
r
r
r
r
r
r
r
r
r
The response, y, is a count consisting of nonnegative integers.

As the value of increases, the probability of 0 counts decreases.
y must allow for the possibility of 0 counts.
The fitted or predicted variable, , is the expected mean of the distribution
of y.
The variance is closely approximated as + 2 or (1 + ).
A foremost goal of NB regression is to model data in which the value of the
variance exceeds the mean, or the observed variance exceeds the expected
variance.
A well-fitted NB model has a dispersion statistic approximating 1.0 and an
AIC/BIC and log-likelihood statistic less than alternative count models.
The model is not misspecified.
The number of predicted counts is approximately the same as the number
of observed counts across the distribution of y.
5.2.1 A Word Regarding Parameterization of

the Negative Binomial
A caveat should be given regarding the parameterization of the negative
binomial distribution and model. R, and recently several books that use R
134
TABLE 5.2. R: Comparison of Direct versus Indirect Dispersion
medpar
los white+
hmo+type2+
type3
los white+
hmo
value with +
dispersion
Poi dispersion
DIRECT NB dispersion
NB alpha
INDIRECT NB dispersion
NB theta
6.260405
1.091024
0.445757
0.254205
2.243376
7.739524
1.328627
0.484603
0.359399
2.063547
when discussing and using negative binomial regression, employ an indirect

parameterization of the mean and dispersion parameter.
Stata, SAS, SPSS, Genstat, Limdep, and most major commercial statistical software parameterize the negative binomial with a direct relationship
between the mean and dispersion. That is, the greater variability or correlation there is in the data, the greater the value the dispersion parameter
will have as well. The variance function for this parameterization of negative
binomial is + 2 .
Recall that the mean and variance of the Poisson model are both , which
is the underlying basis for the meaning of equidispersion. A Poisson model
is overdispersed if there is more variability in the data than the mean, or
the events we are counting do not occur at a uniformly random rate in
each time period or area in our data. The negative binomial model has
a variance function that allows for modeling overdispersed Poisson data.
Table 5.2 provides values demonstrating the difference in direct and indirect
parameterizations.
Remember, there is a clear distinction between the dispersion statistic and
dispersion parameter. The dispersion statistic is an indicator of excess variability, or lack of it, in the model being fit. The dispersion parameter is a measure of the adjustment made to the overdispersion in the model without the
parameter. For example, the negative binomial dispersion parameter shows
the adjustment made to the Poisson model. A generalized negative binomial,
which we discuss later in the book, adjusts for variability in excess of the distributional assumptions of the negative binomial model. For instance, recall
that Poisson dispersion reflects events entering into areas or periods in a
135
uniform manner. The negative binomial then gave a gamma shape to how
events enter into periods or areas in y. But the limitation of the negative binomial is its assumption that events enter every period or area in the data in the
same way. Events enter with the same type of gamma shape. A three-parameter
negative binomial allows for different gamma shapes for each period or area
in y. It adjusts or describes the distribution of y in more detail.
Table 5.2 shows that the Poisson dispersion statistic rises when there is
increased variability added to the data. Here we dropped two statistically
significant predictors, which will increase the model variability. When a negative binomial model is applied to both the full and reduced models, both the
negative binomial dispersion statistic and parameter (alpha) values increase
as well. For the inverted parameterization of the NB dispersion parameter, the NB dispersion statistic increases but the dispersion parameter, theta,
decreases. It is the inverse value of the direct relationship. With increased
variability, the negative binomial value for theta decreases. This seems rather
counterintuitive.
Why would an analyst prefer to use an indirect relationship between the
mean and dispersion parameter for the negative binomial? Essentially the
reason comes from the relationship of the variance and gamma variance. The
Poisson variance is and the gamma variance 2 /v. Adding the two together
produces + 2 . Of course, one can argue that the second term can also
appear as 1 2 , so that = 1/v, with being the dispersion parameter. In
effect, though, there is no mathematical reason for not inverting so that the
dispersion parameter coheres with the direction of variability in the model. I
have to admit that I have had to correct a misinterpretation of the dispersion
parameter in numerous manuscripts that I have refereed where R was used
by the authors for modeling negative binomial data. Misinterpretations also
commonly occur when an analyst who uses Stata, SAS, or another of the major
commercial packages evaluates or comments on negative binomial results
based on R. However, there are R users such as myself who use glm.nb but
invert theta to alpha for interpreting results. Care must be taken when doing
this, though, since the Pearson residuals differ as well and they cannot be
simply inverted to correspond to a direct relationship.
As a result, I will use the nbinomial function when using a negative
binomial model for examples in the text. It is a function both in the msme
and COUNT packages on CRAN. Note that nbinomial has an option that
allows estimation using the indirect relationship as well. The output appears
almost identical to that of glm.nb, but it also provides a summary of Pearson
136
residuals, the Pearson Chi2 statistic, and dispersion statistic in the output. A
likelihood ratio test with a boundary test option is also provided.
5.3 TWO MODELING EXAMPLES

I will continue using the German health data, rwm1984, and the U.S. Medicare data, medpar, as example data for estimating negative binomial model
parameters. We have found that both sets of data are overdispersed. The data
were selected because rwm1984 has far more zero counts than allowed given
both Poisson or negative binomial distributional assumptions and because
medpar is not capable of having any zero counts. Both of these situations
result in overdispersion. However, always keep in mind that overdispersion
may come from more than one source. Data can simultaneously have excessive zeros, be structured in clusters, and have missing interaction terms.
Adjusting for one source of overdispersion does not thereby absolve other
sources from needing adjustment.
There are a host of different ways in which count data can come to an
analyst. Analysts with some experience modeling count data will generally
recognize those that are overdispersed. A model with no zero counts and
a mean value for y of 2 to 3 will likely be overdispersed. A model with
excessive zero counts will nearly always be overdispersed. If the data are
truncated, censored, clustered, or in most any shape other than Poisson, the
data will be overdispersed or sometimes underdispersed.
Underdispersion is typically found when the counts are heavily clumped
together the data are not as dispersed or as variable as would be expected
given a Poisson distribution with a specified mean. The negative binomial
model cannot adjust for underdispersion. In fact, if an analyst attempts to
model data that are underdispersed using a Poisson regression, the software
may never converge or may crash. If there is a little excess variability in the
model, a negative binomial model might be able to converge with statistical
output nearly identical to Poisson, but thats the limit.
5.3.1 Example: rwm1984

For the first example, Ill extend the predictor list for the German health data
to include predictors for gender, marital status, and educational level. Gender
is indicated with the variable female, with female having a value of 1 and
137
male 0. If a patient is married, married = 1; not married is 0. There are

four levels of education, edlevel1 through edlevel4. edlevel is a categorical
variable but is factored into four separate 0, 1 dummy, or indicator variables.
Level of |
education |
Freq.
Percent
Cum.
------------+----------------------------------Not HS grad |
3,152
81.36
81.36
HS grad |
Coll/Univ |
Grad School |
203
289
230
5.24
7.46
5.94
86.60
94.06
100.00
The default reference level for both Stata and R is the first level. For SAS,
it is the highest level, level 4. We use the default, which has over 81% of
the observations. In such a case, level 1 is the reasonable reference level
since it is both intuitively preferred, being at the base of an ordered group of
educational levels, and has by far the most patients. As a caveat, the second
level is not significant for most of the models we run on the data, indicating
that there is no statistically significant difference in the two groups and their
propensity to visit their physician. Visits generally indicate sickness, but not
always. If we assume that it does, we cannot differentiate instances of new
sickness from treatment for continuing problems. Its best to maintain the
visit interpretation.
Next we should look at the distribution of the response variable, docvis,
which indicates how many visits were made by a patient to the doctor in
1984. We did this for visits 07 in Section 2.4; you are invited to look back
at that section. To summarize, though, there are 1611 subjects in the study
with an observed frequency of 0 counts, which is 41.58% of the data set. We
calculated the predicted value in Section 2.4 as well, which, given a Poisson
distribution, is 4.2%, nearly ten times less than observed. To calculate what
is expected, we do the following:
. sum docvis
Variable |
Obs
Mean
Std. Dev.
Min
Max
-------------+-------------------------------------------------------docvis |
3874
3.162881
6.275955
0
121
With a mean of 3.16, the expected percentage of 0 counts is

. di exp(-3.162881)* (3.1628810)/exp(lnfactorial(0))
.04230369
138
or an expected 164 patients (3874 * .0423) with no visits to a physician

throughout the year.
Stata allows the user to create a global variable containing a list of variables. A global variable is used with a preceding $ sign. We first refer to the
expanded model of these data that we developed in Section 2.4, observing a
dispersion statistic of over 11.0 and AIC and BIC statistics at approximately
31,000:
. use rwm1984
. global xvar "outwork age female married edlevel2 edlevel3 edlevel4"
Because of the overdispersion, we employ a robust variance estimator. It

is likely that it will accompany us throughout most of the models that will
later be examined. With nearly 4000 observations in our model, a dispersion
statistic of 11.2 is quite high:
. glm docvis $xvar, fam(poi) vce(robust) nolog nohead
--------------------------------------------------------------------------|
docvis |
Robust
Coef.
Std. Err.
P|z|
---------+----------------------------------------------------------------outwork |
.26473
.0934473
2.83
0.005
.0815767
age |
.0221169
.002909
7.60
0.000
.0164153
.4478834
.0278185
female |
.2615599
.0914541
2.86
0.004
.0823132
.4408065
.0419602
married |
-.128839
.0871441
-1.48
0.139
-.2996382
edlevel2 |
-.0743016
.1043152
-0.71
0.476
-.2787557
.1301524
edlevel3 |
-.1825212
.0972583
-1.88
0.061
-.373144
.0081016
edlevel4 |
-.2644094
.1556778
-1.70
0.089
-.5695323
.0407135
_cons |
.0156058
.1801753
0.09
0.931
-.3375313
.3687428
---------------------------------------------------------------------------
Married and all educational levels fail to significantly contribute to an

understanding of visits to the doctor. With the large amount of overdispersion, though, employing a negative binomial model, or later a zero-inflated
count model, may result in these predictors being significant.
I have found that the user-authored countfit command (Long and
Freese 2006) is an excellent means of obtaining an overview of the differences
between the Poisson and negative binomial models. The incidence rate ratios
(IRR) and standard errors are listed for all predictors for both models in a
side-by-side manner to assist comparison:
139
. countfit docvis $xvar, prm nbreg max(12) /* PRM=Poisson regression model */

/* NBRM = NB regression model */
-------------------------------------------------------Variable |
PRM
NBRM
-------------------------------+-----------------------docvis
|
1=not working; 0=working |
1.303
1.314
|
12.31
4.59
Ages 25-64 |
1.022
1.024
|
26.08
9.63
1=femaie; 0=male |
1.299
1.372
|
12.33
5.60
Married=1; Single=0 |
0.879
0.826
|
-5.91
-2.92
edlevel==HS grad |
0.928
0.892
|
-1.76
-0.96
edlevel==Coll/Univ |
0.833
0.823
|
-4.59
-1.91
edlevel==Grad School |
0.768
0.696
|
-5.50
-3.14
Constant |
1.016
0.987
|
0.35
-0.11
-------------------------------+-----------------------lnalpha
Constant |
2.251
|
26.13
-------------------------------+-----------------------Statistics
alpha |
2.251
N |
3874
3874
ll | -1.55e+04
-8306.328
log-likelihood
bic | 31071.122
16687.015
substantially lower
aic | 31021.026
16630.657
-------------------------------------------------------legend: b/t
Comparison of Mean Observed and Predicted Count
Maximum
At
Mean
Model
Difference
Value
|Diff|
--------------------------------------------PRM
0.343
0
0.060
NBRM
-0.040
1
0.010
PRM: Predicted and actual probabilities
140
Count
Actual
Predicted
|Diff|
Pearson
-----------------------------------------------not displayed
-----------------------------------------------Sum
0.952
0.999
0.778 7304.642
NBRM: Predicted and actual probabilities
Count
Actual
Predicted
|Diff|
Pearson
-----------------------------------------------0
0.416
0.411
0.005
0.251
1
0.116
0.156
0.040
39.735
2
0.114
0.096
0.017
12.287
3
0.091
0.067
0.024
32.969
4
0.055
0.050
0.005
2.077
5
0.043
0.038
0.005
2.673
6
0.036
0.030
0.006
5.213
7
0.015
0.024
0.009
11.730
8
0.022
0.019
0.002
1.225
9
0.012
0.016
0.004
3.528
10
0.012
0.013
0.002
0.720
11
0.009
0.011
0.002
2.143
12
0.011
0.009
0.002
1.494
-----------------------------------------------Sum
0.952
0.940
0.124
116.046
Tests and Fit Statistics
PRM
BIC= -936.032 AIC=
8.007 Prefer Over Evidence
------------------------------------------------------------------------vs NBRM
BIC=-15320.139 dif= 14384.107 NBRM
PRM
Very strong
AIC=
4.293 dif=
3.715 NBRM
PRM
LRX2=14392.370 prob=
0.000 NBRM
PRM
p=0.000
------------------------------------------------------------------------NBRM
BIC=-15320.139 AIC=
4.293 Prefer Over Evidence
The note on the upper left-hand side of Figure 5.3 informs us that positive
deviations show underpredictions. The figure is a graph of Poisson and NB
model residuals. Imagine a horizontal line from 0 to 12 at the zero (0) point.
Residuals close to the zero line are well fitted. Both Poisson and negative
binomial models fit the data well, starting with the sixth visit. Before that, the
negative binomial does much better. This same information can be obtained
numerically by viewing the actual and predicted probability tables which
are outstanding diagnostic tools.
Although most information we need is provided here, for comparison purposes with later modeling Ill provide a negative binomial model of the data.
141
-.1 -.05 0
Observed-Predicted
.05 .1
Note: positive deviations show underpredictions.
6
7
Count
PRM
10
11
12
NBRM
FIGURE 5.3. Graph of Poisson and NB model residuals.
We find that the dispersion is 1.43, indicating that there is more variability
in the data than can be adjusted for using a negative binomial model. Recall
that we still have the excessive zero counts we have not adjusted for. Note
that the dispersion parameter is 2.25, which is fairly high. We should also
compare it with the NB1 linear negative binomial model:
NB2 - NEGATIVE BINOMIAL (TRADITIONAL)
. glm docvis $xvar, fam(nb ml) vce(robust) nolog
No. of obs
3874
Optimization
Residual df
3866
: ML
Scale parameter =
Deviance
3909.433546
(1/df) Deviance =
1.011235
Pearson
5517.070211
(1/df) Pearson
1.427075
Variance function: V(u) = u+(2.2506)u2

[Neg. Binomial]
AIC
BIC
= -28031.62
4.292374
142
--------------------------------------------------------------------------|
Robust
docvis |
Coef.
Std. Err.
P|z|
---------+----------------------------------------------------------------outwork |
.2733504
.0812069
3.37
0.001
.1141879
.4325129
age |
.0232448
.0026847
8.66
0.000
.0179828
.0285068
female |
.3164156
.0758391
4.17
0.000
.1677737
.4650576
married |
-.1906226
.0855496
-2.23
0.026
-.3582968
-.0229485
edlevel2 |
-.1139377
.1051687
-1.08
0.279
-.3200647
.0921893
edlevel3 |
-.1948105
.098729
-1.97
0.048
-.3883158
-.0013051
edlevel4 |
-.3628498
.1321642
-2.75
0.006
-.6218868
-.1038127
_cons |
-.013249
.1520918
-0.09
0.931
-.3113435
.2848456
---------------------------------------------------------------------------
. qui nbreg docvis $xvar,
vce(robust) nolog
. abich
AIC Statistic
4.29289
BIC Statistic
4.298453
BIC(Stata) = 16687.016
AICH Statistic
4.291909
AICH*n
AIC*n
= 16630.656
= 16605.557
This code captures the log-likelihood from the model, storing it in llnb2:
. scalar llnb2 = e(ll)
It will help in assessing the fit of the model if we can see the relationship of
the fit and observed probabilities of docvis. Stata code for constructing Figure
5.3 is provided. It is an adaptation of the code in Hilbe (2011). This code can
be adapted for any negative binomial model using the nbreg command.
Caveat: recall that the glm command enters the dispersion parameter into
the estimation algorithm as a constant. As such, it does not add the dispersion
as an extra parameter when calculating the AIC and BIC degrees of freedom.
The full maximum likelihood command, nbreg, estimates the dispersion,
adding it to the degrees of freedom. There is therefore a slight difference
in AIC and BIC values between the two methods. The dispersion parameter
should be added to the calculation. I calculated the correct values by quietly
running nbreg before abich.
To run the code in Table 5.3, I suggest downloading the file from the
books web site, typing doedit on the Stata command line, and pasting the
code into the editor. When ready to run, click Tools on the menu and then
click on Execute (do). The figure will be in the graphics screen.
If the option disp(constant) is placed at the end of the second line of
code in Table 5.3, an NB1 model will be produced. You can compare the
143
TABLE 5.3. Stata: Observed versus Predicted Counts for docvis

qui {
qui nbreg docvis outwork age married female edlevel2 edlevel3 edlevel4
predict mu
local alpha = e(alpha)
gen amu = mu* e(alpha)
local i 0
local newvar "pri"
while i =15 {
local newvar "pri"
qui gen newvar = exp(i*ln(amu/(1+amu)) - (1/alpha)*ln(1+ amu)+
lngamma(i +1/alpha) /*
*/
- lngamma(i+1) - lngamma(1/alpha))
local i = i + 1
}
quietly gen cnt = .
quietly gen obpr = .
quietly gen prpr = .
local i 0
while i =15 {
local obs = i + 1
replace cnt = i in obs
tempvar obser
gen obser = (e(depvar)==i)
sum obser
replace obpr = r(mean) in obs
sum pri
replace prpr = r(mean) in obs
local i = i + 1
}
gen byte count = cnt
label var prpr "NB2 - Predicted"
label var obpr "NB2 - Observed"
label var count "Count"
}
twoway scatter prpr obpr count, c(l l) ms(T d) title("docvis Observed vs
Predicted Probabilities") sub("Negative Binomial") ytitle(Probability of
Physician Visits)
144
docvis Observed vs Predicted Probabilities
Probability of Physician Visits

.1
.2
.3
.4
Negative Binomial
10
15
Count
NB2 - Predicted
NB2 - Observed
FIGURE 5.4. Negative binomial model: docvis observed vs. predicted probabilities.
predicted values for NB1 and NB2 by typing the following on the command
line:
. rename prpr prnb2
. rename obpr obnb2
. drop mu*
. drop count
then rerun the code in the dofile editor with the changes you have made
to it
You may adapt the code in Table 5.3 for use with other models. However,
you should type ereturn list to check the e() macros that are saved following
the execution of the regression to determine if their names are different. If
you use the correct macro names, you can adapt the code in Table 5.3 to
compare observed versus predicted probabilities across a number of different
regression models. R users can usually find the names of saved statistics in
the help files.
We have examined the relationship of Poisson and NB2 models, and the
observed versus predicted values of the response variable, docvis (see Figure
5.4). A remaining comparison can be made between NB2 and NB1:
145
NB1 - LINEAR NEGATIVE BINOMIAL

. nbreg docvis $xvar, nolog vce(robust) disp(constant)
Negative binomial regression
= constant
Dispersion
Number of obs
3874
Wald chi2(7)
312.30
Prob chi2
0.0000
-------------------------------------------------------------------------|
Robust
docvis |
Coef.
Std. Err.
P|z|
---------+---------------------------------------------------------------outwork |
.1861926
.0489325
3.81
0.000
.0902868
age |
.01871
.0018376
10.18
0.000
.0151084
.2820985
.0223116
female |
.3081968
.0481739
6.40
0.000
.2137777
.4026158
.0525076
married |
-.0430265
.0487428
-0.88
0.377
-.1385605
edlevel2 |
.0533671
.0844128
0.63
0.527
-.112079
.2188132
edlevel3 |
-.0041829
.0772246
-0.05
0.957
-.1555403
.1471746
edlevel4 |
-.2383558
.0989037
-2.41
0.016
-.4322035
-.0445081
_cons |
.1013333
.1021209
0.99
0.321
-.0988199
.3014865
---------+---------------------------------------------------------------/lndelta |
1.976527
.0561385
1.866498
2.086556
---------+---------------------------------------------------------------delta |
7.217632
.405187
6.465611
8.057122
-------------------------------------------------------------------------. abich
AIC Statistic
4.280869
AIC*n
BIC Statistic
4.286432
BIC(Stata) = 16640.445
= 16584.086
AICH Statistic
4.279888
AICH*n
= 16558.986
. scalar llnb1 = e(ll)
Note that the AIC and BIC statistics are better for the NB1 model. Aside
from the AIC and BIC comparative-fit tests, the optimal tool for deciding
between NB1 and NB2 is the generalized NB-P negative binomial, discussed
in the final section of this chapter. I leave the model diagnostics to you.
R code in Tables 5.4 and 5.5 provides a means to replicate some of the output obtained from using countfit. Additional code will be made available
on the books web site as it is produced.
The interpretation of the Poisson and negative binomial models is the
same. Any model with a log link function will have the same interpretation.
When the coefficients are exponentiated, both regressions will be able to be
interpreted as incidence rate ratios, as discussed in Chapter 2, on Poisson
regression. You are referred there for the following model:
146
. nbreg docvis $xvar, nolog
vce(robust) irr

= mean
Dispersion
Number of obs
3874
Wald chi2(7)
231.08
Prob chi2
0.0000
-------------------------------------------------------------------------|
Robust
docvis |
IRR
Std. Err.
P|z|
---------+---------------------------------------------------------------outwork |
1.314361
.106737
3.37
0.001
1.12096
1.54113
age |
1.023517
.0027479
8.66
0.000
1.018146
1.028917
female |
1.372201
.1039725
4.18
0.000
1.182828
1.591892
married |
.8264441
.0707537
-2.23
0.026
.6987797
.9774323
edlevel2 |
.8923135
.0938496
-1.08
0.279
.7260923
1.096587
edlevel3 |
.8229906
.0812487
-1.97
0.048
.6782051
.9986852
edlevel4 |
.6956908
.0919757
-2.74
0.006
.5368845
.9014707
_cons |
.9868381
.150062
-0.09
0.931
.7325028
1.329482
---------+---------------------------------------------------------------/lnalpha |
.8112091
.037307
.7380888
.8843295
---------+---------------------------------------------------------------alpha |
2.250628
.0839641
2.091934
2.42136
--------------------------------------------------------------------------
TABLE 5.4. R: rwm1984 Modeling Example

# make certain the appropriate packages are loaded
# USING glm.nb
summary(nbx - glm.nb(docvis ~ outwork + age + married + female +
edlevel2 + edlevel3 + edlevel4, data=rwm1984))
exp(coef(nbx)); exp(coef(nbx))*sqrt(diag(vcov(nbx)))
exp(confint.default(nbx))
alpha - 1/nbx$theta; alpha; P__disp(nbx)
modelfit(nbx)
xbnb - predict(poi1); munb - exp(xbnb)
# expected variance of NB model (using alpha where alpha=1/theta)
mean(munb)+ (1/nbx$theta)*mean(munb)2
round(sqrt(rbind(diag(vcov(nbx)), diag(sandwich(nbx)))), digits=4)
# USING nbinomial
summary(nb1 - nbinomial(docvis ~ outwork + age + married + female +
modelfit(nb1)
147
TABLE 5.5. R: rwm1984 Poisson and NB2 Models

library(COUNT);library(msme)
data(rwm5yr);rwm1984 - subset(rwm5yr, year==1984)
# POISSON
poi - glm(docvis ~ outwork + age + married + female +
edlevel2 + edlevel3 + edlevel4,
family = poisson, data = rwm1984)
summary(poi)
#NB2
summary(nb1 - nbinomial(docvis ~ outwork + age + married + female +
# NB1
library (gamlss)
summary(gamlss(formula = docvis ~ outwork + age + married + female +
edlevel2 + edlevel3 + edlevel4, family = NBII, data = rwm1984))
I will work through the interpretations of the preceding table, with the
understanding that there are alternative ways of expressing essentially the
same thing. If you are interpreting a model based on coefficient values, it is
wise to exponentiate them before attempting an interpretation. Exponentiated
coefficients are called incidence rate ratios. When the response is binary, an
TABLE 5.6. Interpretation of German Health Care Parameter Estimates
Patients who are out of work visit the doctor some 31% more often than working
patients.
For each one-year increase in age, a patient is expected to go to the doctor a little
over 2% more often.
Females see the doctor some 37% more often than males.
Single patients are expected to go to the doctor some 21% more often than married
patients. Note that 1/.8264441 = 1.21000. Or we can affirm that married patients
are expected to see the doctor some 17.5% less often than single patients. I prefer
to interpret the relationship in a positive manner (i.e., more than).
Patients who have a college or university education are expected to go to the doctor
some 17.5% less often than those who have not been to college. Because edlevel2
is not significant, edlevel1 and edlevel2 have been merged. Edlevel12 is the
reference level.
Patients with at least some graduate school education were about 30% less likely to
see a doctor (in 1984) than patients who never went to college.
148
exponentiated coefficient is a risk ratio, but counts may be interpreted as

risks as well, if it makes sense.
For each of the interpretations in Table 5.6, the predictors not being interpreted are held to a constant value, typically at their mean value. The important thing is that the interpretation be adjusted by the other predictors in the
model. The adjustment results in the interpretation they are given. (Note:
This is because coefficients are partial derivatives.) I will not express the
common phrase holding the values of the other predictors at a constant. It
is understood.
5.3.2 Example: medpar

The medpar data, as you may recall, are part of the U.S. Medicare data for
Arizona in 1991. A specific diagnostic group is represented. The response,
length of stay (los), represents how long a patient was registered in a hospital
for a specific disease. type is a categorical variable that has been factored into
three levels or categories and is used to explain los. The categories are defined
in the following table.
. tab type
Type of |
admission |
Freq.
Percent
Cum.
----------------+----------------------------------Elective Admit |
Urgent Admit |
Emergency Admit |
1,134
265
96
75.85
17.73
6.42
75.85
93.58
100.00
----------------+----------------------------------Total |
1,495
100.00
White indicates that the patient identified themselves as Caucasian. hmo is

an acronym for health maintenance organization. If a patient belongs to one,
hmo = 1. If not, they are coded 0.
A Poisson model of the data, with robust standard errors, can be given as
follows:
. glm los hmo white type2 type3, nolog fam(poi) vce(robust)
No. of obs
1495
Optimization
Residual df
1490
Scale parameter =
: ML
149
Deviance
8142.666001
(1/df) Deviance =
5.464877
Pearson
9327.983215
(1/df) Pearson
6.260391
AIC
9.276131
BIC
= -2749.057
-------------------------------------------------------------------------|
Robust
los |
Coef.
Std. Err.
P|z|
--------+----------------------------------------------------------------hmo |
-.0715493
.0517323
-1.38
0.167
-.1729427
.0298441
white |
-.153871
.0833013
-1.85
0.065
-.3171386
.0093965
type2 |
.2216518
.0528824
4.19
0.000
.1180042
.3252993
type3 |
.7094767
.1158289
6.13
0.000
.4824562
.9364972
_cons |
2.332933
.0787856
29.61
0.000
2.178516
2.48735
-------------------------------------------------------------------------. abich
AIC Statistic
9.276131
AIC*n
BIC Statistic
9.280208
BIC(Stata) = 13894.365
= 13867.815
AICH Statistic
9.274205
AICH*n
= 13854.255
Note the high dispersion statistic at 6.26. Also, robust or empirical standard
errors were given the model because of the overdispersion. The model without
robust SEs had all p-values as statistically significant. It is noteworthy that
the data do not have 0 counts. We will come back to this when we evaluate
zero-truncated models.
We next tabulate los. Note the comparatively greater number of 1 counts.
Some 8.5% of patients stayed only a single night in the hospital:
. tab los
hospital |
Length of |
Stay |
Freq.
Percent
Cum.
------------+----------------------------------1 |
126
8.43
8.43
2 |
3 |
4 |
71
75
104
4.75
5.02
6.96
13.18
18.19
25.15
5 |
123
.
8.23
.
33.38
.
74 |
91 |
116 |
1
1
1
0.07
0.07
0.07
99.87
99.93
100.00
150
Run a negative binomial model, comparing it to the earlier Poisson models

we made of the data:
. glm los hmo white type2 type3, nolog fam(nb ml) vce(robust)
No. of obs
1495
Optimization
: ML
Residual df
=
Scale parameter =
1490
1
Deviance
=
1568.14286
Pearson
= 1624.538251
Variance function: V(u) = u+(.4458)u2
(1/df) Deviance =
(1/df) Pearson =
[Neg. Binomial]
1.052445
1.090294
AIC
= 6.424718
BIC
= -9323.581
-----------------------------------------------------------------------|
Robust
los |
Coef.
Std. Err.
z
P|z|
-------+---------------------------------------------------------------hmo |
white |
type2 |
-.0679552
-.1290654
.221249
.0513265
.0710282
.0530361
-1.32
-1.82
4.17
0.186
0.069
0.000
-.1685533
-.2682782
.1173001
.0326429
.0101473
.3251978
type3 |
.7061588
.1157433
6.10
0.000
.4793061
.9330116
_cons |
2.310279
.0689142
33.52
0.000
2.17521
2.445348
-----------------------------------------------------------------------. abich
AIC Statistic
6.426055
AIC*n
BIC Statistic
AICH Statistic
=
=
6.432411
6.42592
BIC(Stata) = 9638.8125
AICH*n
= 9589.0547
= 9606.9531
The negative binomial is a substantial improvement over the Poisson

model. The dispersion has been reduced to 1.09, indicating that the data
still have more variability than is accounted for using a negative binomial
model. Without the robust standard errors, the model SEs tell us that hmo
is clearly not significant and that white likely is not either. Robust standard
errors tell us the same story. We may suspect that the model is misspecified,
so try checking whether NB2 or NB1 better fits this data using a linktest:
. linktest
Dispersion
= mean
Log likelihood = -4797.2636
Number of obs
1495
LR chi2(2)
118.46
Prob chi2
0.0000
Pseudo R2
0.0122
151
-------------------------------------------------------------------------los |
Coef.
Std. Err.
P|z|
---------+---------------------------------------------------------------_hat |
-.2952803
1.986614
-0.15
0.882
-4.188973
3.598412
_hatsq |
.2598939
.3982465
0.65
0.514
-.5206548
1.040443
_cons |
1.59086
2.446458
0.65
0.516
-3.20411
6.38583
---------+---------------------------------------------------------------/lnalpha |
-.8083432
.0444598
-.8954828
-.7212036
---------+---------------------------------------------------------------alpha |
.4455957
.0198111
.4084104
.4861668
-------------------------------------------------------------------------Likelihood-ratio test of alpha=0:
chibar2(01) = 4260.59 Prob=chibar2 =
0.000
The _hatsq predictor is not significant, indicating that the model is not
misspecified. An NB1 test is attempted next.
To check the NB1 parameterization, we run a model, check the AIC and
BIC statistics, and run a linktest. To save space, we will not display the
regression results but only the summary statistics of interest. Placing a qui in
front of a Stata command suppresses the display to screen:
. qui nbreg los hmo white type2 type3, nolog disp(const)
. abich
AIC Statistic
BIC Statistic
=
=
6.471913
6.478269
AIC*n
= 9675.5107
BIC(Stata) = 9707.3701
AICH Statistic
6.471778
AICH*n
= 9657.6123
. linktest
-----------------------------------------------------------------------los |
Coef.
Std. Err.
z
P|z|
-------+---------------------------------------------------------------_hat |
-8.003606
4.769589
-1.68
0.093
-17.35183
1.344617
_hatsq |
_cons |
1.987063
10.15396
.9933492
5.700143
2.00
1.78
0.045
0.075
.0401342
-1.018113
3.933992
21.32604
_hatsq |
1.987063
.9933492
2.00
0.045
.0401342
3.933992
The linktest fails, indicating that the NB1 model is misspecified. In addition, the AIC and BIC statistics are greater than for NB2, and of course very
much greater than with Poisson.
At this point, it is clear that we need to determine whether the lack of
0 counts in the model affects the dispersion. Its greater than it should be, but
not bad.
152
TABLE 5.7. Medpar Data IC Test Results

POISSON
NB1
NB2
-----------------------------------------------------------------------AIC*n
13867.815
9675.5107
9606.9531
BIC
13894.365
9707.3701
9638.8125
AICH*n
Variable |
13854.255
Obs
9657.6123
Mean
Std. Dev.
9589.0547
Min
Max
---------+-----------------------------------------------------los |
1495
9.854181
8.832906
1
116
The mean of los is 9.85, indicating that, on average, patients were in the
hospital some 10 days. Because the mean is so high, it is unlikely that lack of
0 counts will make a difference. With a mean of 9, the percentage of 0 counts
expected is near 0. Also look at the standard deviation, 8.83. The variance
is the square of the standard deviaton 78. This value clearly violates the
Poisson assumption of equidispersion. We will explore other alternatives for
these data in subsequent chapters as we look at more complex modeling
strategies.
5.4 ADDITIONAL TESTS

5.4.1 General Negative Binomial Fit Tests
There are several tests we have previously discussed that relate to testing the
fit of negative binomial models. In general, if a negative binomial model has
a substantially lower AIC and BIC set of statistics than other models, then it
can be regarded as the better-fitted model. By set of AIC and BIC statistics
I mean the values displayed in the abic or abich command output when
using Stata (author commands), or modelfit when using R. modelfit is
a function in the COUNT package, where it is associated with the irls and
ml group of functions as well as with Rs glm and glm.nb functions. It does
not currently work with nbinomial.
Negative binomial regression is nearly always used to model overdispersed
Poisson data. What happens, though, if the value of alpha () is close to 0? The
Poisson model can be thought of as a negative binomial with 0 dispersion (i.e.,
with 0, where values slightly greater than 0 can be within the confidence
153
interval for the Poisson dispersion). In Section 4.2.2, we demonstrated the use
of a one-sided boundary likelihood ratio test to be used following estimation
of a negative binomial model, testing whether the dispersion parameter, ,
is statistically different from 0. You are referred to that discussion. We also
presented several tests for overdispersion in Section 4.3. You are also referred
there.
In the following two subsections, we test negative binomial models by
employing different types of regression models. Both of the extended negative binomial models we consider here have been referred to as generalized
negative binomial models. The first, NB-P, is a generalized negative binomial
model since it adds an additional parameter to the base NB2/NB1 model.
The second, NB-H, is not a generalized negative binomial in the usual sense,
although it is called that by Stata.
Both models test the base negative binomial for different purposes. The
NB-P model is primarily used to decide between using an NB2 model or an
NB1 model. It does this by parameterizing the negative binomial exponent.
The heterogeneous negative binomial, NB-H, parameterizes the dispersion
parameter, with the goal of determining which predictors add or adjust for
excess variability in the data. This in turn produces overdispersion in the data.
5.4.2 Adding a Parameter NB-P Negative Binomial

Earlier, we introduced the NB1 or linear negative binomial model. There are
times when it fits the data more optimally than NB2. William Greene (2008)
of New York University (and author of the Limdep econometrics software
program) developed a variation of the negative binomial model that allows
the exponent of the second term of the variance to be parameterized.1 The
effect of doing so is that the dispersion statistic is allowed to vary across
observations:
Poisson equidispersion; variance does not vary from mean
NB dispersion parameter allows a constant dispersion value for all observations
NB-P a second dispersion parameter allows the dispersion to vary across
observations
1
Although Greene was the first to actually develop software for parameterizing the
exponent of the negative binomial variance, this parameterization is mentioned
in Cameron and Trivedi (1998), Winkelmann (2008), and described in Hilbe and
Greene (2008).
154
To explain, recall that the variance functions of the NB1 and NB2 models
are, respectively,
(5.4)
NB1 + or + 1
and
(5.5)
NB2 + 2
The difference rests in the value of the exponent. To choose between them,
Greene let the exponent become a parameter to be estimated, called , for
power. is the Greek letter rho. The model is called, appropriately, NB-P:
NB-P +
(5.6)
The derivation of the NB-P probability and log-likelihood functions can be

found in Hilbe (2011) and in the Limdep Reference Manual. As an example,
we use the German health data that have been used throughout the text.
First, lets begin by creating a global variable, called xvar, that contains our
predictor list:
. use rwm1984
. global xvar "outwork age female married edlevel2 edlevel3 edlevel4"
. nbregp docvis $xvar, nolog vce(robust)
Negative binomial-P regression
Number of obs
3874
Wald chi2(7)
186.34
Prob chi2
0.0000
---------------------------------------------------------------------------|
docvis |
Robust
Coef.
Std. Err.
P|z|
-----------+---------------------------------------------------------------outwork |
.2329032
.0632728
3.68
0.000
.1088908
age |
.0221351
.0024555
9.01
0.000
.0173225
.3569157
.0269477
female |
.3420894
.0594544
5.75
0.000
.225561
.4586178
married |
-.0799971
.064053
-1.25
0.212
-.2055387
.0455445
edlevel2 |
.0163448
.0993362
0.16
0.869
-.1783506
.2110403
edlevel3 |
-.0555854
.0937499
-0.59
0.553
-.2393319
.1281611
edlevel4 |
-.2940122
.1187276
-2.48
0.013
-.526714
-.0613103
_cons |
-.0660212
.1287343
-0.51
0.608
-.3183357
.1862934
-----------+---------------------------------------------------------------/P |
1.363081
.1248427
/lntheta |
1.545855
.1509675
10.92
0.000
1.118394
1.607769
1.249964
1.841746
-----------+---------------------------------------------------------------theta |
4.69198
.7083367
3.490217
6.307539
---------------------------------------------------------------------------Likelihood-ratio test of P=1:
chi2 =
10.16 Prob chi2
0.0014
Likelihood-ratio test of P=2:
chi2 =
56.73 Prob chi2
0.0000
155
. abich
AIC Statistic
4.278763
AIC*n
BIC Statistic
4.285488
BIC(Stata) = 16638.549
= 16575.928
. scalar llnbp = e(ll)
The AIC and BIC values are only a little less than for the NB1 model but
are significantly less than in NB2. However, this finding needs to be checked
using a likelihood ratio test. The likelihood ratio (LR) test between NB-P and
NB2 can be given as follows:
LIKELIHOOD RATIO TEST
. di -2*(llnb2 - llnbp)
56.728519
P-VALUE FOR LR TEST
. di chi2tail(1, 56.72852)
5.003e-14
The likelihood ratio test of the hypothesis that the model having a of
1.36 is statistically the same as NB2, with a = 2, is rejected. Recall that
with 1 degree of freedom, any Chi2 test statistic having a value greater than
3.84 will reject the hypothesis that the models being compared are statistically
the same. The same holds when comparing NBP and NB1, with = 1. These
tests inform us that the model is neither NB1 nor NB2.
Recall also that Greene provides us with another test statistic one to
determine whether NB2 is preferable to NB1. It is based on the powers. The
resultant statistic is distributed as a reverse cumulative upper tail Students t
test with 1 degree of freedom:
nbp nb2
nbpse
(5.7)
Here we have
. di (1.363081 -2)/.1248427
-5.1017721
. di ttail(1, -5.1017721)
.93838908
Values of p greater than 0.05 are not significantly different. For our models,
the data can be modeled using either NB1 or NB2. However, given the lower
value of the AIC and BIC statistics, NB1 should likely be preferred.
156
TABLE 5.8. Major Points: NB-P

r The NB-P model allows the dispersion to vary across observations instead of
assuming that it is a constant shape for all observations in the model.
r The estimated power gives an indication of preference to modeling as NB2 or
NB1 but allows the model to stand in its own right.
r Likelihood ratio tests are given comparing the NB-P with NB2 and NB1. The
test with the lowest Chi2 statistic is generally preferred.
There are some, including myself, who will take the NB-P model results
as valuable in themselves, and not merely as a test between NB2 or NB1. If
an NB-P test result comes with a substantially lower information criterion
value, then I suggest using NB-P as the model of choice. In this case, no such
determination can be made between NB1 and NB2, so NB-P should be used
as the preferred model.
As of this writing, no NB-P function exists in R. As soon as a function is
developed, I will provide information on this books web site regarding how
it may be downloaded.
5.4.3 Modeling the Dispersion Heterogeneous

Negative Binomial
In order to determine the source of over- or underdispersion, it may be helpful to discover how the predictors themselves contribute to the dispersion
parameter. There is a statistical procedure designed for exactly this purpose. In particular, I have found it to be invaluable for discovering sources
of overdispersion. At the very minimum, knowing that a specific predictor
significantly contributes to the dispersion parameter allows the analyst to
explore the predictor in more detail and to have additional information about
the data for discussion in a research report.
As an example, I will use the Squirrel data set (nuts) from Zuur, Hilbe,
and Ieno (2013). As originally reported by Flaherty et al. (2012), researchers
recorded information about squirrel behavior and forest attributes across various plots in Scotlands Abernethy Forest. The study focused on the following
variables:
response cones = number of cones stripped by red squirrels per plot
predictor sntrees = standardized number of trees per plot
157
sheight = standardized mean tree height per plot

scover = standardized percentage of canopy cover per plot
The stripped cone count was only taken when the mean diameter of trees
was under 0.6 m (dbh). I will provide R output as the primary example for
this section. I begin by modeling the data with a Poisson model in order
to obtain a base model and to determine the Poisson dispersion statistic. Rs
glm quasipoisson model provides the dispersion statistic in its output. Poisson
does not:
R CODE
POISSON
library(COUNT) : data(nuts)
nut - subset(nuts, dbh.6)
sntrees - scale(nut$ntrees)
sheight - scale(nut$height)
scover - scale(nut$cover)
summary(PO - glm(cones ~ sntrees + sheight + scover,
family=quasipoisson, data=nut))
Coefficients:
(Intercept)
sntrees
Estimate Std. Error t value Pr(|t|)

2.6352
0.1546 17.041
2e-16 ***
0.2739
0.1068
2.566
0.0135 *
sheight
scover
---
0.2004
0.5280
0.1734
0.2439
1.156
2.164
0.2536
0.0355 *
(Dispersion parameter for quasipoisson family taken to be 13.68122)
The dispersion statistic is 13.68, indicating substantial Poisson overdispersion. Only the standardized tree height predictor is not significant, but
because of the overdispersion we have no idea of the significance status of
any of the predictors. A table of the response, SqCones, shows that the mean
number of cones stripped is 16.49. Five 0 counts is excessive, but the data
are fairly uniformly distributed after 5. The excess zero counts may be a
reason for overdispersion, but we really have no idea whether that is the
case:
table(nut$cones)
0 1 2 3 4
5 1 3 4 5
48 55 57 60 61
1 1 1 1 1
5
3
6
1
7
1
9 11 12 14 15 16 17 18 20 21 22 25 27 32 35 42 44 47
2 2 2 1 1 2 1 2 1 1 1 1 1 1 1 1 1 1
158
summary(nut$cones )
Min. 1st Qu. Median
0.00
3.50
11.00
Mean 3rd Qu.

16.49
21.50
Max.
61.00
A negative binomial model is a reasonable one to use at this point in order

to determine how much of the variability in the model can be appropriately
adjusted:
NEGATIVE BINOMIAL
library(msme)
summary(NB - nbinomial(cones ~ sntrees + sheight + scover, data=nut)
.
.
.
Coefficients (all in linear predictor):
Estimate
SE
Z
p
(Intercept)
2.627 0.142 18.53 1.24e-76
sntrees
sheight
scover
0.306 0.161
0.158 0.159
0.536 0.179
1.90
0.99
3.00
(Intercept)_s
0.927 0.199
4.65 3.37e-06
Null deviance: 77.26177
on
LCL
UCL
2.34948 2.905
0.0573 -0.00945 0.621

0.322 -0.15463 0.470
0.00274 0.18516 0.886
0.53584 1.318
49 d.f.
Residual deviance: 59.07252 on 46 d.f.

Null Pearson: 58.54636 on 49 d.f.
Residual Pearson: 41.19523 on 46 d.f.
Dispersion: 0.8955485
AIC: 383.8132
The Poisson overdispersion in the data is well adjusted by the negative

binomial, but the data are actually NB2-underdispersed, with a dispersion of
.90. We can determine the source of the Poisson overdispersion by modeling
the data with a heterogeneous negative binomial. Rather than the dispersion
being the same in each cell of counts, as is the case with standard negative
binomial regression, the dispersion here is itself parameterized, and differs
from cell to cell. We then might determine which predictors have the most
influence on extradispersion:
HETEROGENEOUS NEGATIVE BINOMIAL
summary(HNB - nbinomial(cones ~ sntrees + sheight + scover,
+
formula2 =~ sntrees + sheight + scover, data=nut, family = "negBinomial",
scale.link = "log_s"))
Deviance Residuals:
Min. 1st Qu.
Median
Mean 3rd Qu.
-2.7910 -0.9137 -0.3023 -0.3208
0.4419
Max.
1.5670
159
Pearson Residuals:
Median
Mean
3rd Qu.
Max.
-1.14700 -0.70960 -0.23950
Min.
1st Qu.
0.03088
0.31550
3.20200
Coefficients (all in linear predictor):

Z
(Intercept)
Estimate
2.6147 0.144 18.159
1.1e-73
2.3325 2.897
sntrees
0.2731 0.110
2.478
0.0132
0.0571 0.489
sheight
0.0744 0.144
0.516
0.5217 0.158
3.300 0.000967
scover
SE
LCL
UCL
0.606 -0.2081 0.357

0.2118 0.832
(Intercept)_s
-0.1950 0.238 -0.821
0.412 -0.6608 0.271
sntrees_s
-0.3834 0.323 -1.186
0.236 -1.0168 0.250
sheight_s
0.3312 0.321
1.033
0.302 -0.2973 0.960
scover_s
0.2723 0.417
0.652
0.514 -0.5459 1.091
Null deviance: 85.07187
on
Residual deviance: 59.49816

Null Pearson: 45.30266
on
Residual Pearson: 46.82167
49 d.f.
on
43 d.f.
49 d.f.
on
43 d.f.
Dispersion: 1.088876
AIC:
385.7116
exp(coef(HNB))
(Intercept)
sntrees
sheight
13.6637970
1.3140450
1.0772100
sntrees_s
sheight_s
scover_s
0.6815513
1.3925859
1.3130309
scover (Intercept)_s
1.6849189
0.8228193
Exponentiation of the coefficients provides us with incidence rate ratios.

Remember, though, that the dispersion parameter is now partitioned across
the predictors we have selected to parameterize the dispersion. Here none
of the dispersion component predictors appear significant. I suggest that the
standard errors be adjusted using a robust variance estimator. I adjusted the
H-NH model standard errors using robust estimators and found that they
made no difference in the significance of the values.
Some major points regarding the heterogeneous negative binomial are:
r Dispersion predictors (lnalpha) specify which predictors most influence
the value of the dispersion parameter.
r An analyst can use NB-H to verify preconceived sources of overdispersion
in the data.
r Robust standard errors should be used as the default.
160
TABLE 5.9. Stata: Squirrel Data

. use nuts
. center ntrees, prefix(s) standard
. center height, prefix(s) standard
. center cover, prefix(s) standard
. global xvars "sntrees sheight scover"
. glm cones $xvars if dbh.6, fam(pois) nolog
. nbreg cones $xvars if dbh.6, nolog
. gnbreg cones $xvars if dbh.6, nolog lnalpha($xvars)
. gnbreg cones $xvars if dbh.6, nolog lnalpha($xvars) vce(robust)
results not displayed
5.5 SUMMARY
The negative binomial model is commonly used by statisticians and analysts
to model overdispersed Poisson data. Typically, negative binomial regression
is used as a catch-all model for overdispersed count data. Many times
perhaps most of the time we dont know the reason for overdispersion. We
may have suspicions, such that there are an excessive number of zeros in the
data, that the data are correlated, or even that there are no zero counts in
the data. There are a host of reasons why data can be overdispersed. There are
also many models to address the variety of overdispersion we find in study
data. But if we have no clear idea as to what is causing overdispersion in a
Poisson model, analysts generally turn to negative binomial regression.
Negative binomial regression is a two-parameter model that is estimated
using either maximum likelihood estimation or by IRLS estimation as a member family of generalized linear models (GLMs). When the negative binomial
is estimated as a GLM, the dispersion parameter is entered into the IRLS estimating algorithm as a constant. Some IRLS routines exist that estimate the
dispersion parameter, , using an outside maximum likelihood procedure,
which then sends the result back into the IRLS fitting algorithm. R, Stata,
SAS, and Limdep use this method for negative binomial estimation.
Two models were discussed that extend the basic negative binomial
model the three-parameter NB-P and the heterogeneous negative binomial, NB-H. The NB-P model parmeterizes the negative binomial variance
exponent, allowing analysts to determine whether the data are better modeled using NB1 or NB2. The NB-H model allows analysts to determine which
5.5 Summary
161
predictors contribute model extradispersion. Both are valuable diagnostic

models, as well as alternative negative binomial models in their own right.
There are a wide number of enhanced negative binomial commands or
functions that adjust the basic negative binomial algorithm to allow estimation of complex count data. We will address many of these in the following
pages. However, we first must address a mixture count model that is not
negative binomial but is rather a mixture of Poisson and inverse Gaussian
distributions. It is one of the three basic types of count models we discuss in
the book.
CHAPTER 6
Poisson Inverse Gaussian

Regression

r
r
r
r
Why hasnt the PIG model been widely used before this?
What types of data are best modeled using a PIG regression?
How do we model data with a very high initial peak and long right skew?
How do we know whether a PIG is a better-fitted model than negative
binomial or Poisson models?
6.1 POISSON INVERSE GAUSSIAN MODEL ASSUMPTIONS

The Poisson inverse Gaussian (PIG) model is similar to the negative binomial
model in that both are mixture models. The negative binomial model is a
mixture of Poisson and gamma distributions, whereas the inverse Gaussian
model is a mixture of Poisson and inverse Gaussian distributions.
Those of you who are familiar with generalized linear models will notice
that there are three GLM continuous distributions: normal, gamma, and
inverse Gaussian. The normal distribution is typically parameterized to a lognormal distribution when associated with count models, presumably because
the log link forces the distribution to have only nonnegative values. The
162
163
6.1 Poisson Inverse Gaussian Model Assumptions
TABLE 6.1. MeanVariance Comparison
Mean
Variance
Inv Variance
POI
NB1
NB2
PIG
NB-P
+
+
+ 2
+ 2
+ 3
+ 3
Poisson and negative binomial (both NB2 and NB1) models have log links.
Recall that the negative binomial is a mixture of the Poisson and gamma
distributions, with variances of and 2 /v, respectively. We inverted so
that there is a direct relationship between the mean, dispersion, and variance function. Likewise, the inverse Gaussian is a mixture of Poisson and
inverse Gaussian distributions, with an inverse Gaussian variance of 3 .
The meanvariance relationship of the Poisson, negative binomial, PIG, and
NB-P, with accepted symbols for the inversely parameterized dispersion, is
given in Table 6.1.
I parameterize the PIG distribution and associated regression model as the
negative binomial is traditionally parameterized, with a direct relationship
between the mean and dispersion parameter. Doing this directly relates the
mean and amount of overdispersion in the data. The dispersion for the PIG
model will also be given the name alpha, . The dispersion is often given as nu,
, or phi, . I will use to refer to the dispersion parameterized indirectly with
the mean such that = 1. This is similar to the relationship we discussed
regarding the negative binomial, where theta is the inverse of : = 1. We
must make a clear distinction, though, in how is understood here. GLM
theory symbolizes the exponential family link function as . R, however, has
chosen to use the same symbol for the dispersion parameter as well. My caveat
is to keep the distinction in mind when dealing with this class of models.
Recall Table 5.1, in which we compared the relationship of the mean and
variance for several values of the Poisson and negative binomial distributions.
The PIG variance can be added to the table for comparative purposes.
Table 6.2 shows us that with greater mean values of the PIG distribution
come increasingly greater values of the variance. With a dispersion parameter
greater than 1, greater values of the mean of the response variable in a
PIG regression provide for adjustment of greater amounts of overdispersion
than does the negative binomial model. Simply put, PIG models can better
deal with highly overdispersed data than can negative binomial regression,
particularly with data clumped heavily at 1 and 2.
164
POISSON INVERSE GAUSSIAN REGRESSION
TABLE 6.2. Mean Dispersion Variance Relationships
+ 2
+ 3
+ 2
+ 3
.5
.5
.5
.5
1
1
1
1
.5
1
2
5
5
1
2
5
0.625
0.75
1.0
1.75
1.5
2.0
3.0
6.0
.0563
.063
.755
1.125
1.5
2.0
3.0
6.0
5
5
5
5
10
10
10
10
.5
1
2
5
.5
1
2
5
17.5
30
55
130
60
110
210
510
67.5
130
255
380
510
1010
2010
5010
: Poisson; + 2 : NB2; + 3 : PIG.
The foremost assumptions of the PIG model are similar to those underlying
the negative binomial model. The key difference is the following:
PIG regression is used to model count data that have a high initial peak
and that may be skewed to the far right as well as data that are highly
Poisson overdispersed.
The PIG probability distribution, as a variety of Sichel distribution, can be
given as

(y )2
(6.1)
exp
f (y; , ) =
2y3
22 y
with {y, , } 0.
Again, a value of the model rests in the fact that it can capture the modeling
of count data that are sharply peaked and skewed to the far right (e.g., hospital
data where most patients are discharged within the first few days and then the
numbers taper off quickly, with a few perhaps lingering on for a long time).
The negative binomial model may do a poor job of modeling such data, as
will other count models. The PIG model is the only model we describe that
can deal with this form of data.
The preceding PDF can be used to calculate PIG probabilities, as we did
for the Poisson and NB2 distributions. Parameterizing = 1 for a direct
165
relationship, with = 1, y = 2, and = .5, we have a predicted PIG

probability of
. di sqrt(1/(1*2*_pi*23)) * exp((-(2-.5)2)/(1* 2*.52 * 2))
.01486629
We can place this formula within a loop to obtain a range of probability

values. Refer to Tables 1.2a and 1.2b for the PIG PDF formula using R and
Stata, respectively. You can obtain the shape of the distribution for any mean
and value of alpha you specify.
6.2 CONSTRUCTING AND INTERPRETING THE PIG MODEL

6.2.1 Software Considerations
No commercial statistical software offers the PIG model as a component of its
official offerings. However, Stata has commands for its use, with the following
three commands authored by Hardin and Hilbe:
pigreg: PIG regression
zipig: zero-inflated PIG (ZIPIG)
ztpig: zero-truncated PIG (ZTPIG)
The first two commands listed were written for the authors text Hardin and
Hilbe (2012), whereas the ZTPIG model was written (by Hardin) for the
present book. As we will later discover, zero-truncated count models are vital
as the count component of hurdle models; we develop a PIG-logit hurdle
model in the following chapter.
The R package gamlss (Rigby and Stasinopoulos 2008) supports PIG and
ZIPIG modeling. It is the only R package to my knowledge that provides
PIG modeling capability. I use both pigreg and gamlss in this chapter for
example purposes. I am not aware of a SAS macro for PIG.
6.2.2 Examples
I begin by modeling the German health data using the rwm1984 file that was
used earlier in the book (see Table 6.3). The reduced model data will be used,
166
TABLE 6.3. R: Poisson Inverse Gaussian rwm1984

library(gamlss); library(COUNT); library(msme); library(sandwich)
summary(nbmod - glm.nb(docvis ~ outwork + age, data=rwm1984))
vcovHC(nbmod)
sqrt(diag(vcovHC(nbmod, type="HC0")))
pigmod - gamlss(docvis ~ outwork + age, data=rwm1984, family=PIG)
summary(pigmod)
exp(coef(pigmod))
vcovHC(pigmod)
sqrt(diag(vcovHC(pigmod, type="HC0")))
which includes outwork and age as predictors. Recall that outwork is binary
and age is continuous, ranging from 25 to 64. Earlier, we centered the variable, which technically is the appropriate manner of handling a continuous
predictor that does not start near 0 or 1. For pedagogical purposes, Ill leave
age in its natural form. docvis ranges from 0 to 121, but there are only a few
patients visiting a physician this much during the year. We will test the PIG
model against NB2. Remember that the data have far more zero counts than
allowed by the distributional assumptions:
. use rwm1984
NB2 MODEL
. glm docvis outwork age, nolog
vce(robust) fam(nb ml)
not displayed
. abic
AIC Statistic
BIC Statistic
=
=
AIC*n
= 16673.525
BIC(Stata) = 16698.572
4.303956
4.304753
. predict munb
(option n assumed; predicted number of events)
. linktest
_hatsq |
.0551027
.1963277
0.28
0.779
-.3296926
.439898
The negative binomial passes the linktest; it appears not to be misspecified:

PIG MODEL
. pigreg docvis outwork age, nolog vce(robust)
Poisson-Inverse Gaussian regression
Number of obs
3874
167
Wald chi2(2)
=
1527.35
Prob chi2
=
0.0000
-----------------------------------------------------------------------|
Robust
docvis |
Coef.
Std. Err.
z
P|z|
------------+----------------------------------------------------------outwork |
age |
.5277197
.0268643
.019414
.0010644
27.18
25.24
0.000
0.000
.489669
.0247781
.5657705
.0289506
_cons | -.2856271 .0556537

-5.13 0.000
-.3947063 -.1765479
------------+----------------------------------------------------------/lnalpha |
1.344595
.0152366
1.314732
1.374459
------------+----------------------------------------------------------alpha |
3.836634
.0584573
3.723753
3.952936
-----------------------------------------------------------------------. abich
AIC Statistic
BIC Statistic
=
=
4.327597
4.328395
AIC*n
= 16765.111
BIC(Stata) = 16790.158
You may compare the predicted counts for the NB2 (munb) and PIG (mupig)
models as we have for other models:
. predict mupig
. linktest
_hatsq |
.3137388
.1355676
2.31
0.021
.0480311
.5794465
. pigreg , irr
Number of obs
Wald chi2(2)
=
=
3874
1527.35

Prob chi2
=
0.0000
-----------------------------------------------------------------------|
Robust
docvis |
IRR
Std. Err.
z
------------+----------------------------------------------------------outwork |
age |
_cons |
1.695063
1.027228
.7515428
.0329079
.0010934
.0418261
27.18
25.24
-5.13
0.000
0.000
0.000
1.631776
1.025088
.6738779
1.760804
1.029374
.8381587
------------+----------------------------------------------------------/lnalpha |
1.344595
.0152366
1.314732
1.374459
------------+----------------------------------------------------------alpha |
3.836634
.0584573
3.723753
3.952936
------------------------------------------------------------------------
168
The linktest evaluates whether the assumption of linearity has been

violated. If the square of the hat matrix diagonal is significant, then the
assumption has been violated as is the case here. The test informs us that
the PIG model is misspecified, that the PIG distribution is not the correct
distribution to model these data. Note that the AIC and BIC statistics are
greater than those of the negative binomial model.
We interpret the rate ratios the same way as for negative binomial regression, where patients who are not working were expected to see the doctor
70% more often in 1984 than working patients. The value of the PIG IRR for
age is the same as we had for the negative binomial. Unfortunately, we cannot
trust the estimates. They may be the same as for the negative binomial model,
but the negative binomial model is itself highly overdispersed in the sense
that there is more variability in the data than allowed by the NB2 distributional
assumptions.
I show the gamlss output to display the dispersion parameter, sigma. The
value is 1.344. This value is on the log scale and must be exponentiated to
obtain the model dispersion value. Note that the following display exponentiates the value of sigma to obtain 3.83435, the value of alpha resulting from
the Stata estimation:
Mu Coefficients:
Estimate
(Intercept) -0.28577
Std. Error
0.10801
t value
-2.646
Pr(|t|)
8.186e-03
outwork
0.52763
0.05563
9.485 4.096e-21
age
0.02686
0.00241
11.146 2.020e-28
------------------------------------------------------------------Sigma link function: log
Sigma Coefficients:
Estimate Std. Error
(Intercept)
1.344
0.04166
t value
Pr(|t|)
32.26
1.792e-202
exp(1.344)
[1] 3.83435
We next model the medpar data using a PIG model. Recall that the type
categorical variable refers to the type of admission to a hospital. Type1, the reference level, is an elective admission, type2 is urgent, and type3 is emergency.
We use a robust variance estimator since we found Poisson overdispersion in
the data:
169
. pigreg los hmo white type2 type3, vce(robust) irr

Number of obs
Wald chi2(4)
=
=
1495
6047.35

Prob chi2
=
0.0000
-----------------------------------------------------------------------|
Robust
los |
IRR
Std. Err.
z
------------+----------------------------------------------------------hmo | .9418869 .0055989
-10.07
0.000
.930977
.9529247
white |
type2 |
.87023
1.218342
.0054969
.0060711
-22.01
39.63
0.000
0.000
.8595228
1.206501
.8810706
1.2303
type3 |
1.688646
.0149556
59.16
0.000
1.659586
1.718214
_cons | 10.33001 .1612098

149.63
0.000
10.01883
10.65086
------------+----------------------------------------------------------/lnalpha | -.6022063
.117711
-.8329157
-.371497
------------+----------------------------------------------------------alpha |
.5476021
.0644588
.4347797
.6897011
-----------------------------------------------------------------------. abich
AIC Statistic
6.430156
AIC*n
BIC Statistic
AICH Statistic
=
=
6.436512
6.430021
BIC(Stata) = 9644.9424
AICH*n
= 9595.1846
= 9613.084
. linktest
-----------------------------------------------------------------------los |
Coef.
Std. Err.
z
P|z|
------------+----------------------------------------------------------_hat | -1.085516
3.213062 -0.34
0.735
-7.383002
5.211969
_hatsq | .4303325
.6625117
0.65
0.516
-.8681666
1.728832
_cons | 2.505929
3.868191
0.65
0.517
-5.075586
10.08744
------------+----------------------------------------------------------/lnalpha | -.6035841
.0571029
-.7155038 -.4916645
------------+----------------------------------------------------------alpha | .5468481
.0312266
.4889457
.6116076
-----------------------------------------------------------------------Likelihood-ratio test of alpha=0:
Prob=chibar2 = 0.000
chibar2(01) = 4241.09
The AIC and BIC tests are statistically the same as for the negative binomial
model. The linktest indicates that the model is not misspecified (_hatsq =
.516). The negative binomial model linktest fails, though, with a hat-squared
170
TABLE 6.4. Interpretation of PIG Model Predictors

Private-pay patients are expected to stay in the hospital some 6% longer than HMO
patients. (1/.9419 = 1.06)
Nonwhite patients are expected to stay in the hospital some 15% longer than white
patients. (1/.87 = 1.149)
Urgent admissions are expected to stay in the hospital some 22% longer than
elective admission patients. (1.218)
Emergency admissions are expected to stay in the hospital some 69% longer than
elective admission patients. (1.689)
TABLE 6.5. R: Poisson Inverse Gaussian medpar

library(gamlss); library(COUNT); library(msme); library(sandwich)
data(medpar)
summary(nbmod1 - glm.nb(los ~ hmo + white + factor(type),data=medpar))
vcovHC(nbmod1)
sqrt(diag(vcovHC(nbmod1, type="HC0")))
pigmod1 - gamlss(los ~ hmo + white + factor(type), data=medpar, family=PIG)
summary(pigmod1)
exp(coef(pigmod1))
vcovHC(pigmod1)
sqrt(diag(vcovHC(pigmod1, type="HC0")))
value of 0.036. It appears that the PIG model is to be preferred over the
negative binomial model.
6.3 SUMMARY COMPARING POISSON, NB, AND PIG MODELS

Two sets of data were modeled using Poisson, negative binomial, and Poisson
inverse Gaussian regressions. Both data sets are Poisson overdispersed, as
well as having more variation in them than allowed by negative binomial
distributional assumptions.
The fact that the rwm1984 data have an excessive number of zeros and
medpar cannot have zero counts is likely the reason for the remaining
overdispersion in the negative binomial model. The most reasonable test
model for the rwm1984 data is a zero-inflated model. The most reasonable
171
6.3 Summary Comparing Poisson, NB, and PIG Models
docvis Observed vs Predicted Probabilities
Probability of Physician Visits

.1
.2
.3
.4
Poisson Inverse Gaussian
10
15
Count
NB2 - Predicted
NB2 - Observed
FIGURE 6.1. Poisson inverse Gaussian model: docvis observed vs. predicted probabilities.
test model for the medpar data is a zero-truncated model. We address both
of these models in the following chapter.
I should mention that it is possible to program a Stata command like
countfit to incorporate pigreg as an optional model. It does not exist
at present. A graphic like Figure 5.4 for observed versus predicted PIG can
nevertheless be made by substituting
qui gen newvar = exp((-(i-mu)2)/(alpha*2*i*mu2)) *
(sqrt(1/(alpha*2*_pi*i3)))
in place of the negative binomial PDF in Table 5.3. Running the code produces
Figure 6.1.
R code for the same figure may be created by substituting the R PIG PDF
for the R code used to generate the negative binomial version of this figure.
Graphics such as these are valuable ways in which an analyst can assess the
fit of the model they believe best describes their study data.
CHAPTER 7
Problems with Zeros

r When is it necessary to use a zero-truncated count model?
r In what sense is a hurdle model called a two-part model and a zero-inflated
model a mixture model?
r How can a count model be used as a binary component of a hurdle model?

r What is meant by good and bad zeros?
r How does an analyst decide between using a hurdle or zero-inflated model
on data with excessive zeros?

The Poisson, negative binomial, and Poisson inverse Gaussian probability
distributions all assume that the count data being modeled have zero counts.
Exactly how many zeros is deterministically calculated based on the respective
PDF and the mean of the counts in the distribution. For example, if we have
a Poisson model with 100 observations and the mean of the count response
is 3.0, we expect that the percentage of zero counts will be
. di exp(-3) * 30 / exp(lnfactorial(0))
.04978707
and that the number of zero counts will be .04978707 * 100 = 4.978707,
or 5.
172
173
When there is a substantial disparity between the expected and observed

zero counts in the data, given the mean of the response variable and number
of observations in the model, a Poisson distribution should likely not be used
to model the data. An adjustment can be made to the underlying PDF, or an
entirely different model may be selected. The same is the case for negative
binomial and PIG regressions.
In this chapter, we discuss what to do when there is no possibility of a
count variable having a zero count, when there are far more zero counts than
expected, when there are fewer zero counts than expected, and when the
response can be broken up into two components, with one system generating
zero counts and another having counts beginning with one (1). These are
hurdle models:
R
================================================
exp(-3) * 30 / exp(log(factorial(0)))
100* (exp(-3) * 30 / exp(log(factorial(0))))
================================================
7.1 COUNTS WITHOUT ZEROS ZERO -TRUNCATED MODELS

Many times we are asked to model count data that structurally exclude zero
counts. Hospital length of stay data are an excellent example of count data
that cannot have a zero count. When a patient first enters the hospital, the
count begins. Upon registration, the length of stay is given as one (1). There
can be no zero days, unless we are describing patients who do not enter
the hospital, but this is an entirely different model. In such a case, there
may be two generating processes one generating 0s and another generating
positive counts. I discuss this situation in the sections on hurdle models and
zero-inflated count models.
When data structurally exclude zero counts, the underlying probability
distribution must preclude this outcome in order to model the data properly.
This is not to say that Poisson and negative binomial regressions are not commonly used to model such data; rather, the point is that in general they should
not. The Poisson and negative binomial probability functions, and the other
zero-truncated models described in this section, typically need to be amended
to exclude zeros. At the same time, the amended probability function must
174
PROBLEMS WITH ZEROS
provide for all of the constituent probabilities in the distribution to sum to 1.

If the PDF does not sum to 1, it is no longer a probability distribution.
Zero-truncation models take two forms:
r as a model specifically designed to account for the absence of zero counts
and
r as one of the options in constructing a left-truncated count model.
With respect to the second form, we will be addressing truncated models

in Chapter 9. Truncating zeros is just one of the points in the distribution
of counts where it may be cut. We will focus on the first meaning of zero
truncation in this section, with the understanding that full-fledged truncated
count models can easily be used for the purpose of cutting zeros from the
distribution and adjusting the PDF accordingly.
We will discuss the following zero-truncated models in this section:
r
r
r
r
r
zero-truncated Poisson (ZTP)

zero-truncated negative binomial (ZTNB)
zero-truncated Poisson inverse Gaussian (ZTPIG)
zero-truncated generalized NB-P negative binomial (ZTNBP)
zero-truncated Poisson log-normal (ZTPLN)
I should mention at this point that zero-truncated models have another use
besides adjusting the underlying PDF of a model and the log-likelihood of its
estimation algorithm so that they can model data that preclude the possibility
of 0s. I am referring to their use as a component of hurdle models. We will
discuss hurdle models in the following section.
Also to be mentioned is the fact that some statisticians have encouraged
the use of shifted Poisson models when there are structurally no possible zero
counts. That is, the counts are shifted left so that 1 counts become 0s, 2s
become 1s, and so forth. A problem is that the resultant model is not based
on data as they in fact exist. My caveat is that if a shifted model is employed
on study data, it must be reported in study results.
7.1.1 Zero-Truncated Poisson (ZTP)

With respect to the Poisson distribution, the probability of a zero count
is exp(), based on the PDF given in equation (1.3). This value needs
to be subtracted from 1 and then the remaining probabilities rescaled on
175
this difference. That is, the Poisson PDF is rescaled to exclude zero counts
by dividing the PDF by 1 Pr(y = 0), which is 1 exp(). This in effect
apportions the withdrawal of zero counts from each element of the Poisson
PDF:
e i i i
f (y; ) =
(1 exp(i ))yi !
y
(7.1)
The resulting log-likelihood function, with = exp(x), is

L(; y|y 0) =
n
{yi (xi ) exp(xi ) ln (yi + 1)
i=1
ln[1 exp( exp(xi ))]}
(7.2)
The model is no longer a GLM and cannot be estimated from within its
umbrella. It is nearly always estimated using a full maximum likelihood
algorithm. We therefore parameterize the log-likelihood in terms of xb and
not .
Perhaps the most important thing to remember about zero truncation is
that it is not really needed unless the mean of the distribution of counts to
be modeled is low. Remember the Poisson PDF earlier in this chapter. We
saw that, for a mean of 3, there should be only 5% 0s in the data. For a
100-observation data set, only 5 out of 100 counts should be 0s. However,
for a mean of 5, we expect 2/3 of 1% of the counts to be 0s (i.e., about 7 out
of 1000):
. di exp(-5) * 50 / exp(lnfactorial(0))
.00673795
For a mean of 12, we expect .0006% 0s, or 6 out of a million 0s:

. di %10.9f exp(-12) * 120 / exp(lnfactorial(0))
0.000006144
If we have a model for which the count response variable has a mean
greater than 5, we simply should not expect any 0 counts at all. So:
r For a Poisson model, if the mean is 5 or more, expect less than 1% 0s in
the data set.
176
PROBLEMS WITH ZEROS
r Check the mean and number of observations of the data first before becom-
ing concerned that you need a zero-truncated model.
r In general, employ robust standard errors for all zero-truncated models.
As an example, we use the medpar data. The response, los, has a mean of
. sum los
Variable |
Obs
Mean
Std. Dev.
Min
Max
------------+----------------------------------------------------------los |
1495
9.854181
8.832906
1
116
With a mean of nearly 10 and with 1495 observations, we expect .079

0s and have none. Because of this, we expect there to be only minuscule
differences between a standard and zero-truncated Poisson. If the mean had
been 2, the differences would have been much more substantial. Finally, the
ZT Poisson model that follows is not misspecified:
PREDICTED PROBABILITY OR 0 COUNTS FOR MEAN=9.854181
. di %10.9f exp(-9.854181) * 9.8541810 / exp(lnfactorial(0))
0.000052527
PREDICTED 0 COUNTS FOR MEAN=9.854181
. di %10.9f exp(-9.854181) * 9.8541810 / exp(lnfactorial(0)) * 1495
0.078528040
Comparing a Poisson and a zero-truncated Poisson on the medpar data,

we have the following results. R code is provided in Table 7.1.
TABLE 7.1. R: Poisson and Zero-Truncated Poisson

library(msme)
library(gamlss.tr)
data(medpar)
poi - glm(los~ white + hmo + factor(type), family=poisson, data-medpar)
summary(poi)
ztp - gamlss(los~ white + hmo + factor(type),data=medpar, family=PO)
gen.trun(0, "POI", type="left", name = "lefttr")
lt0poi - gamlss(los~white+hmo+ factor(type), data=medpar,
family=POlefttr)
summary(lt0poi)
177
. glm los white hmo type2 type3, fam(poi) nolog nohead

POISSON
-----------------------------------------------------------------------|
OIM
los |
Coef.
Std. Err.
z
P|z|
----------+------------------------------------------------------------white |
-.153871
.0274128
-5.61
0.000
-.2075991
-.100143
hmo | -.0715493
type2 | .2216518
type3 | .7094767
.023944
.0210519
.026136
-2.99
10.53
27.15
0.003
0.000
0.000
-.1184786
.1803908
.6582512
-.02462
.2629127
.7607022
_cons | 2.332933
.0272082
85.74
0.000
2.279606
2.38626
-----------------------------------------------------------------------. abic
AIC Statistic
BIC Statistic
=
=
AIC*n
= 13867.815
BIC(Stata) = 13894.365
9.276131
9.280208
. ztp los white hmo type2 type3, nolog

...
ZERO-TRUNCATED POISSON
-----------------------------------------------------------------------los |
Coef.
Std. Err.
z
P|z|
----------+------------------------------------------------------------white | -.1539437
hmo | -.0716485
.0274166
.0239636
-5.61
-2.99
0.000
0.003
-.2076792
-.1186164
-.1002081
-.0246807
type2 |
type3 |
_cons |
.0210563
.0261385
.0272121
10.53
27.15
85.73
0.000
0.000
0.000
.180511
.6583857
2.279526
.2630502
.7608467
2.386195
.2217806
.7096162
2.33286
-----------------------------------------------------------------------. abic
AIC Statistic
=
9.275884
AIC*n
= 13867.447
BIC Statistic
9.279961
BIC(Stata) = 13893.996
There is in fact very little difference in the models. The guideline is that if
the mean of the count response variable is high perhaps over 4 there is
typically no need to model the data using a zero-truncated model.
7.1.2 Zero-Truncated Negative Binomial (ZTNB)

The logic of the zero-truncated negative binomial is the same as for the ZTP.
The probability of a zero count is
(1 + )1/
(7.3)
178
PROBLEMS WITH ZEROS
TABLE 7.2. R: Zero-Truncated Negative Binomial

library(msme); library(gamlss.tr)
data(medpar)
nb - nbinomial(los~ white + hmo + factor(type), data=medpar)
summary(nb)
ztnb - gamlss(los~ white + hmo + factor(type), data=medpar, family=NBI)
gen.trun(0, "NBI", type="left", name = "lefttr")
lt0nb - gamlss(los~white+hmo+ factor(type), data=medpar, family=NBIlefttr)
summary(lt0nb)
Subtracting equation (7.3) from 1, logging the result and dividing the reparameterized negative binomial log-likelihood by the result, we have
n

1/
L(; y|y 0) =
LNB2 ln 1 1 + exp xi
(7.4)
i=1
where the first term in the braces is the standard NB2 log-likelihood function,
given in equation (5.3). Note that since the log-likelihood is on the log scale,
the term 1 Pr(0) must also be logged; i.e., log(1 Pr(0)).
As an example, we use the same medpar data:
. ztnb los white hmo type2 type3, nolog
. .
.
-----------------------------------------------------------------------los |
Coef.
Std. Err.
z
P|z|
-----------+-----------------------------------------------------------white | -.1345583
hmo | -.0726664
type2 | .2344362
.0757438
.0589298
.0559015
-1.78
-1.23
4.19
0.076
0.218
0.000
-.2830134
-.1881666
.1248713
.0138968
.0428339
.3440011
type3 | .7355978
.084056
8.75
0.000
.5708511
.9003445
_cons | 2.272518 .0752203
30.21
0.000
2.125089
2.419947
-----------+-----------------------------------------------------------/lnalpha | -.6007157
.0549884
-.708491
-.4929403
-----------+-----------------------------------------------------------alpha |
.548419
.0301567
.4923866
.6108277
-----------------------------------------------------------------------Likelihood-ratio test of alpha=0: chibar2(01) = 4354.66
. abic
AIC Statistic
6.364409
AIC*n
BIC Statistic
6.370764
BIC(Stata) = 9546.6514
. linktest
...
_hatsq |
.2424067
.4024168
0.60
0.547
= 9514.792
-.5463157
1.031129
179
The AIC statistics for the ZTNB are substantially lower than those associated
with the ZTP, indicating a much better fit.
A standard NB2 model is displayed for comparison. Note that the coefficients differ more than the ZTP did compared with the Poisson model.
Note also that the AIC and BIC values are substantially lower for the zerotruncated model compared with the standard model. Recall that the values
for the Poisson and ZTP were nearly identical. This is because more 0 counts
were predicted for the negative binomial with the mean of los, and therefore
more adjustment had to be made to adjust the truncated model PDF to sum
to 1:
. glm los white hmo type2 type3, fam(nb ml) nolog nohead
-----------------------------------------------------------------------|
OIM
los |
Coef.
Std. Err.
z
P|z|
---------+-------------------------------------------------------------white |
hmo |
-.1290654
-.0679552
.0685416
.0532613
-1.88
-1.28
0.060
0.202
-.2634046
-.1723455
.0052737
.0364351
type2 |
type3 |
_cons |
.221249
.7061588
2.310279
.0505925
.0761311
.0679472
4.37
9.28
34.00
0.000
0.000
0.000
.1220894
.5569446
2.177105
.3204085
.8553731
2.443453
-----------------------------------------------------------------------. abic
AIC Statistic
=
6.424718
AIC*n
= 9604.9531
BIC Statistic
6.428794
BIC(Stata) = 9631.5029
The model is not misspecified, passing the linktest (p = 0.547). The likelihood ratio test tells us that the zero-truncated model is preferable to a
standard negative binomial model.
Calculating the probability of zero counts for a negative binomial distribution is important when deciding if a negative binomial model would benefit by
using a zero-truncated negative binomial. To determine the number of zeros
that is expected for a model whose mean is 2 and alpha is 1, use the code in
the following table and multiply the result by the number of observations in
the model.
Stata: Calculate NB2 expected 0s for given and
=======================================================
. gen a = 1
. gen mu = 2
. gen y=0
180
PROBLEMS WITH ZEROS
. di exp(y*log((a*mu)/(1+a*mu))-(1/a)*log(1+a*mu)+lngamma(y+1/a) lngamma(y+1)-lngamma(1/a)) * number of observations in model

=======================================================
.33333333 * number of observations in the model.
R: Calculate NB2 expected 0s for given and

=======================================================
a - 1; mu - 2 ; y - 0
exp(y*log(a*mu/(1+a*mu))-(1/a)*log(1+a*mu)+
log(gamma(y +1/a))-log(gamma(y+1))-log( gamma(1/a)))
=======================================================
[1] 0.3333333
To demonstrate that the sum of y probability values from 0 to 100 is equal to

1, we do the following:
R: Proof that sum of y probabilities from 0 to 100 is 1
================================================
a - 1 ; mu - 2 ; y - 0:100
ff - exp(y*log(a*mu/(1+a*mu))-(1/a)*log(1+a*mu)+
log(gamma(y +1/a))-log(gamma(y+1))-log( gamma(1/a)))
sum(ff)
================================================
[1] 1
In the negative binomial model for the medpar data, the response, los,
has a mean of 9.854181. Inserting that into the preceding formulae gives
us a predicted probability of a zero count of 0.09213039. Multiplying by
1495 gives us 137.735 as the expected number of zero counts. So a sizable
adjustment must have been made to the distribution since the zeros have
been truncated from the model, as mentioned earlier.
7.1.3 Zero-Truncated Poisson Inverse Gaussian (ZTPIG)

The zero-truncated PIG is a new model with this book and will play an
important role in hurdle models in the following section. I refer you to the
previous chapter, devoted to this class of models, which aims to deal with
data that are highly overdispersed.
181
The probability of a zero (0) PIG count is

1
(1 1 + 2/)
Pr(Y = 0) = exp
(7.5)
where the dispersion statistic is given a direct relationship with the mean (i.e.,
). Dividing the PIG PDF by 1 equation (7.5) results in a zero-truncated
PDF:
. ztpig los hmo white type2 type3, nolog
Zero-truncated PIG regression
Number of obs
LR chi2(4)
=
=
1495
63.10
Prob chi2
=
0.0000
Pseudo R2
=
0.0066
-----------------------------------------------------------------------los |
Coef.
Std. Err.
z
P|z|
-----------+-----------------------------------------------------------hmo | -.0643421
.0593155
-1.08 0.278
-.1805983
.0519142
white | -.1478711
.0747265
-1.98
0.048
-.2943324
-.0014098
type2 |
type3 |
.0554261
.0793471
3.79
6.84
0.000
0.000
.1011741
.3872638
.3184405
.6982988
.2098073
.5427813
_cons | 2.324182
.0741818
31.33 0.000
2.178788
2.469576
-----------+-----------------------------------------------------------/lnalpha | -.5109055
.0608871
-.630242
-.391569
-----------+-----------------------------------------------------------alpha | .5999521
.0365293
.5324629
.6759954
-----------------------------------------------------------------------Likelihood-ratio test of delta=0: chibar2(01) = 4300.05
. abich
AIC Statistic
6.400933
AIC*n
BIC Statistic
6.407289
BIC(Stata) = 9601.2549
AICH Statistic
6.400798
AICH*n
= 9569.3955
= 9551.4971
The model is ideal for highly skewed data and highly overdispersed data
that cannot have zero counts. No R code is currently available for this model.
Note that a linktest failed to prove the model as misspecified. However,
comparing AIC and BIC values, the model does not fit the data as well as the
negative binomial.
182
PROBLEMS WITH ZEROS
Note: The azsurgical data on this bookss web site is ideal for modeling
with a ZTPIG. It is appendectomy data modeling los on procedure. The task
is to discover the extent to which LOS relates to having open or laprascopic
surgery.
7.1.4 Zero-Truncated NB-P (ZTNBP)

. ztnbp los hmo white type2 type3,
Zero-truncated Negbin-P model
Number of obs
1495
Wald chi2(4)
=
50.61
Prob chi2
=
0.0000
-----------------------------------------------------------------------los |
Coef.
Std. Err.
z
P|z|
------------+----------------------------------------------------------hmo | -.0646661 .0483063
-1.34 0.181 -.1593447
.0300126
white |
type2 |
type3 |
-.062624
.2034899
.7023193
.0656351
.0507239
.1081974
-0.95
4.01
6.49
0.340
0.000
0.000
-.1912665
.1040729
.4902563
.0660186
.3029069
.9143823
_cons | 2.216729 .0650517

34.08 0.000
2.08923
2.344227
------------+----------------------------------------------------------/lnalpha | -3.279848 .7890374
-4.16 0.000
-4.826332 -1.733363
/P | 3.177916 .3525702
9.01 0.000
2.486891
3.868941
-----------------------------------------------------------------------alpha |
.037634 .0296946
1.27 0.205
.0080159
.1766893
. abich
AIC Statistic
BIC Statistic
AICH Statistic
=
=
=
6.35102
6.359878
6.353812
AIC*n
= 9494.7744
BIC(Stata) = 9531.9434
AICH*n
= 9471.6875
This is the best-fitted model, if we are to believe the AIC and BIC statistics.
We discussed this model in Chapter 4 as a three-parameter model aimed at
advising the analyst whether NB2 or NB1 better fits the data. It appears that
a PIG model is preferable to NB1 or NB2 since the NB-P power parameter
is 3.18. It would be a mistake to interpret in this manner, though, since
NB-P is based on a negative binomial distribution, not a PIG. However,
given that the ZTNBP model is better fitted than ZTPIG, it appears likely
that there are other causes of overdispersion. Keep in mind that a model
with excessive zero counts will almost always be overdispersed, but there
may be other sources of overdispersion as well. The NB-P model may in
effect be adjusting for multiple sources of overdispersion. Recall that, for
the NB and PIG models, the dispersion statistic has a single value. If there is
183
heterogeneity in the dispersion, then they are not suitable models to adjust for
it. Heterogeneous NB and NB-P are suitable models, though, as are the threeparameter generalized negative binomial models we discuss in Chapter 9.
A linktest was given to the model, indicating that it is not misspecified. Recall that the ZTPIG model also passed the linktest and appears well
specified.
7.1.5 Zero-Truncated Poisson Log-Normal (ZTPLN)

The probability function for the zero-truncated Poisson log-normal is discussed at length in Fabermacher (2011, 2012) in the context of using a
hurdle model to predict the severity of automobile crashes. The model
ztprm, authored by Fabermacher, uses an adaptive Gauss-Hermite quadrature method for model estimation. It is recommended to use a greater number
of quadrature points to gain accuracy, but at the expense of time. The author
of the software recommends that users check the sensitivity of the results:
. ztpnm los hmo white type2 type, vuong
Zero-truncated Poisson normal mixture model
Number of obs
Wald chi2(4)
Prob chi2
=
=
=
1495
56.68
0.0000
-----------------------------------------------------------------------los |
Coef.
Std. Err.
z
------------+----------------------------------------------------------hmo | -.0604598
white | -.1407904
type2 | .2025758
.0573828
.0736062
.0544102
-1.05
-1.91
3.72
0.292
0.056
0.000
-.1729281
-.2850559
.0959339
.0520084
.0034751
.3092177
type3 |
.0828975
6.23
0.000
.3539716
.6789238
.5164477
_cons | 2.096475 .0727834

28.80
0.000
1.953822
2.239128
------------+----------------------------------------------------------/lnsigma | -.3543547 .0263183 -13.46
0.000
-.4059376 -.3027719
-----------------------------------------------------------------------sigma |
.701626 .0184656
Vuong test of ztpnm vs. ztnb: z =
38.00
-3.19
0.000
.6663518
Prz = 0.9993
. abich
AIC Statistic
6.390244
AIC*n
BIC Statistic
AICH Statistic
=
=
6.3966
6.390109
BIC(Stata) = 9585.2744
AICH*n
= 9535.5166
.7387676
= 9553.415
This model is also not misspecified. A Vuong test against the ZTNB is not
good, though, telling us that the ZTNB is the preferred model. Given the
differences in AIC and BIC statistics for each model, this is not surprising.
184
PROBLEMS WITH ZEROS
7.1.6 Zero-Truncated Model Summary

r Zero-truncated models are used
1. when the count data structurally exclude zero counts and

2. for implementation in a hurdle model.
r Zero-truncated models rarely need to be used when the response variable
has a mean greater than 5. When they are employed in a hurdle model,
this guideline is not relevant.
7.2 TWO-PART HURDLE MODELS

Hurdle models were first discussed as far back as 1971 (Cragg 1971), but
Mullahy (1986) is generally given credit for their current popularity in modeling count data. The foremost use of a hurdle model is to deal with count
response variables that have more or fewer zero counts than allowed by
the distributional assumptions of the count model being used to understand
the data. Two types of models are commonly used to handle excess zeros:
hurdle models and zero-inflated models.
The essential idea of a hurdle model is to partition the model into two
parts first, a binary process generating positive counts (1) versus zero
counts (0); second, a process generating only positive counts. The binary
process is typically modeled using a binary model, and the positive count
process is modeled using a zero-truncated count model. The most commonly
used hurdle models are the Poisson-logit, NB2-logit, and NB2-probit models.
Mullahy used logit and cloglog binary models with Poisson and geometric
count models. A geometric model is a negative binomial with the dispersion
parameter constrained to the value of 1. It has the distributional appearance of
a negative exponential distribution, but with discrete values, not continuous
values.
Again, the notion of hurdle comes from considering the data as being
generated by a process that commences generating positive counts only after
crossing a zero barrier, or hurdle. Until the hurdle is crossed, the process
generates zeros. The nature of the hurdle is left unspecified but may simply
be considered as the point where data consist of positive counts. In this sense,
the hurdle is crossed if a count is greater than zero. Note that the hurdle does
not have to be at 0; it may be at any higher value. However, for the binary
component, values below the hurdle point are given the value of 0, and above
the hurdle point they are given the value of 1. Most hurdle models, though,
185
have the hurdle at crossing 0, which is the form we discuss in this section. In
any case, the two processes are conjoined using the log-likelihood
L = ln( f (0)) + {ln[1 f (0)] + ln P (t)}
(7.6)
where f (0) represents the probability of a zero count, and P(t) represents the
probability of a positive count. Equation (7.6) reads that the hurdle model
log-likelihood is the log of the probability of y = 0 plus the log of y = 1 plus
the log of y being a positive count.
In the case of a logit model, the probability of zero is
f (0) = P (y = 0; x) =
1
1 + exp(xi b )
(7.7)
and 1 f (0) is
exp(xi b )
1 + exp(xi b )
(7.8)
which is the probability of y = 1. When constructing log-likelihood functions

for hurdle models, the binary component (e.g., the logit component) in
equation (7.8) is combined with a zero-truncated count model, with the
terms combined as in equation (7.6).
Before giving examples of hurdle models, I should say something about
the availability of software. R users can use the hurdle function that is part of
the pscl package on CRAN for a variety of hurdle models. Stata users must
use the hurdle models I published over a decade ago, or simply construct
the model by estimating its components separately. All of the major hurdle
models are available and are on the books web site. SAS has at least one
user-created macro. See Morel and Neerchal (2012).
7.2.1 Poisson and Negative Binomial Logit Hurdle Models

Both components of a hurdle model may be combined in a single algorithm,
with the log-likelihood formed as in equation (7.6). The two components of a
hurdle model may be estimated separately, with summary statistics calculated
as shown here.
As an example, we model docvis on outwork and age using the German
health data, rwm1984.
186
PROBLEMS WITH ZEROS
TABLE 7.3. R: Poisson-Logit Hurdle

library(pscl); library(COUNT)
hpl - hurdle(docvis ~ outwork + age, dist="poisson", data=rwm1984,
zero.dist="binomial", link="logit")
summary(hpl); AIC(hpl)
The command hplogit is used for modeling. It is an author-written

command:
. hplogit docvis outwork age, nolog
Poisson-Logit Hurdle Regression
Number of obs
Wald chi2(2)
=
=
3874
155.20

Prob chi2
=
0.0000
-----------------------------------------------------------------------|
Coef.
Std. Err.
z
P|z|
------------+----------------------------------------------------------logit
|
outwork | .5247121
.0718972
7.30 0.000
.3837962
.665628
age | .0263374
_cons | -.9935547
.0030821
.1351158
8.55
-7.35
0.000
0.000
.0202966
-1.258377
.0323782
-.7287326
------------+----------------------------------------------------------poisson
|
outwork |
age |
.2134047
.0116587
.0191964
.0008481
11.12
13.75
0.000
0.000
.1757804
.0099965
.251029
.013321
_cons |
1.04142
.0397268 26.21 0.000
.9635565
1.119283
-----------------------------------------------------------------------AIC Statistic =
6.282
. abich
AIC Statistic
BIC Statistic
AICH Statistic
=
=
=
6.283534
6.285986
6.281605
AIC*n
= 24342.41
BIC(Stata) = 24379.982
AICH*n
= 24328.146
Next, lets model the two-part hurdle model separately. We can use the
following code guidelines (see Table 7.4):
r Create a variable visit equal to 1 if docvis 0 and 0 otherwise.
r Model visit on predictors the binary component of the hurdle model.
187
TABLE 7.4. R: Components to Poisson-Logit Hurdle

visit - ifelse(rwm1984$docvis 0, 1, 0)
table(visit)
logis - glm(visit ~ outwork + age, data=rwm1984,
family=binomial(link="logit"))
summary(logis)
library(pscl)
hpl2 - hurdle(docvis ~ outwork + age, data=rwm1984,
dist = "poisson", zero.dist="binomial", link="logit")
summary(hpl2)
logit - glm(visit ~ outwork + age, data=rwm1984,
family=binomial(link="logit"))
summary(logit)
r Model docvis 0 on predictors using a zero-truncated Poisson.

r Compare the result with the hurdle model results.
First, for the binary component, we have the following logistic regression
model:
. gen visit=docvis0
. logit visit outwork age, nolog
Logistic regression
Number of obs
3874
LR chi2(2)
Prob chi2
=
=
164.64
0.0000

Pseudo R2
=
0.0313
-----------------------------------------------------------------------visit |
Coef. Std. Err.
z
P|z|
-----------+-----------------------------------------------------------outwork | .5247119 .0718972
7.30
0.000
.383796
.6656278
age | .0263374 .0030821
8.55
0.000
.0202966
.0323782
_cons | -.9935545 .1351158 -7.35
0.000
-1.258377
-.7287324
-----------------------------------------------------------------------. abich
AIC Statistic
BIC Statistic
AICH Statistic
=
=
=
1.316883
1.317036
1.315514
AIC*n
= 5101.605
BIC(Stata) = 5120.3911
AICH*n
= 5095.2573
188
PROBLEMS WITH ZEROS
It is the same as the hurdle model. Next the count component is modeled:
. ztp docvis outwork age if docvis0, nolog
Zero-truncated Poisson regression
Number of obs
LR chi2(2)
=
=
2263
443.77
Prob chi2
=
0.0000
Pseudo R2
=
0.0226
-----------------------------------------------------------------------docvis |
Coef.
Std. Err.
z
P|z|
--------------+--------------------------------------------------------outwork | .2134047
.0191964
11.12
0.000
.1757804
.251029
age |
_cons |
.0116587
1.04142
.0008481
.0397268
13.75
26.21
0.000
0.000
.0099965
.9635565
.013321
1.119283
-----------------------------------------------------------------------. abich
AIC Statistic
BIC Statistic
=
=
8.502344
8.502605
AIC*n
= 19240.805
BIC(Stata) = 19257.979
AICH Statistic
8.500219
AICH*n
= 19234.209
Since the components of a hurdle model are separate, the log-likelihood

and AIC statistics of the hurdle model are the sum of values. The AICn of the
count component is 19240.805 and the AICn of the logit is 5101.605. The
sum is 24342.41. Note that the AICn value of the hplogit model here is
the same value. Other more complex formulae can be used to calculate the
statistic (Hilbe 2011), but it is easier to simply sum the values of the two
components.
The interpretation is now considered. Each predictor is evaluated in terms
of the contribution it makes to each respective model. For example, with
respect to the Poisson-logit model, a positive significant coefficient in the
Poisson frame indicates that the predictor increases the rate of physician
visits in the same manner as any Poisson model is interpreted. A positive
coefficient in the logit frame is interpreted in such a manner that a oneunit change in a coefficient decreases the odds of no visits to the doctor by
exp(). For example, the logistic coefficient in the hurdle model for outwork
is 0.5247121; therefore the odds of no visits to the physician in 1984 are
decreased by exp(.5247121) = 1.6899722, or about 69%.
We know from previous analyses that rwm1984 is overdispersed. It is
therefore reasonable to model the data as an NB-logit hurdle. If there is
189
reason to believe that the binary component is not asymmetric about .5,
perhaps you should try an NB-complementary loglog hurdle model. I will
not explore these models here, but you should know that they are available
on the books web site.
Look at the changes in the model coefficients and particularly in the standard errors and model p-values. Also check the AIC and BIC statistics to
determine whether the negative binomial component has contributed to a
significant reduction or elimination of overdispersion:
. hnblogit docvis outwork age, nolog
Negative Binomial-Logit
Hurdle Regression
Number of obs
Wald chi2(2)
Prob chi2
=
=
=
3874
155.20
0.0000
-----------------------------------------------------------------------|
Coef. Std. Err.
z
--------------+--------------------------------------------------------logit
|
outwork |
age |
.524712
.0263374
.0718972
.0030821
7.30
8.55
0.000
0.000
.3837961
.0202966
.6656279
.0323782
_cons | -.9935545 .1351158 -7.35 0.000 -1.258377 -.7287325

--------------+--------------------------------------------------------negbinomial
|
outwork |
age |
_cons |
.2844499
.0158616
.3522567
.0621091
.0027161
.1336561
4.58
5.84
2.64
0.000
0.000
0.008
.1627184
.0105382
.0902956
.4061815
.021185
.6142178
--------------+--------------------------------------------------------/lnalpha |
.7514482 .0926998
8.11 0.000
.5697601
.9331364
--------------+--------------------------------------------------------alpha |
2.120068 .1965298
1.767843
2.542471
-----------------------------------------------------------------------AIC Statistic =
4.290
. abich
AIC Statistic
4.292372
AIC*n
BIC Statistic
4.295791
BIC(Stata) = 16672.484
AICH Statistic
4.290557
AICH*n
= 16628.65
= 16611.166
The information criterion tests (AIC and BIC) are significantly lower,
indicating a better fit. We can determine whether robust standard errors are
required for the count component, and we can parameterize the coefficients
190
PROBLEMS WITH ZEROS
as an incidence rate ratio by using the options irr and vce(robust).

. hnblogit docvis outwork age, nolog irr vce(robust)
.
.
.
-----------------------------------------------------------------------|
Robust
|
IRR
Std. Err.
z
P|z|
------------+----------------------------------------------------------logit
|
outwork | 1.689972
.1214699
7.30
0.000
1.467905
1.945634
age | 1.026687
_cons | .3702583
.0031672
.0502134
8.54
-7.33
0.000
0.000
1.020498
.2838357
1.032914
.4829948
------------+----------------------------------------------------------negbinomial |
outwork | 1.329031
.1087
3.48
0.001
1.132182
1.560105
age | 1.015988
.0033321
4.84
0.000
1.009478
1.02254
_cons | 1.422274
.2124444
2.36
0.018
1.061303
1.906017
------------+----------------------------------------------------------/lnalpha | .7514482
.1196007
6.28
0.000
.5170351
.9858614
------------+----------------------------------------------------------alpha | 2.120068
.2535617
1.677048
2.68012
------------------------------------------------------------------------
Robust standard errors differ from the model standard errors for the count
component; we therefore want to keep them in a model.
We have not yet discussed obtaining predicted values from a hurdle model.
We can separate models and obtain predictions for each component, or predict for a specified component in a multicomponent model. The latter is the
best course to take. The following Stata code provides predicted values for
the negative binomial model. If eq(#2) is not specified, the default is the first
logistic model component. We call the fitted or predicted value mu:
. hnblogit_p mu, eq(#2) irr
. l mu docvis outwork age in 1/5
+-----------------------------------+
|
mu
docvis
outwork
age |
|-----------------------------------|
1. | 3.349409
1
0
54 |
2. | 3.798543
0
1
44 |
3. | 4.74305
4. | 3.925132
5. | 3.042121
0
7
6
1
0
1
58 |
64 |
30 |
+-----------------------------------+
191
TABLE 7.5. R: NB2-Logit Hurdle (Assume Model from 7.3 Loaded)

hnbl - hurdle(docvis ~ outwork + age, dist="poisson", data=rwm1984,
zero.dist="binomial", link="logit")
summary(hnbl); AIC(hnbl)
alpha - 1/hnbl$theta ; alpha
exp(coef(hnbl))
predhnbl - hnbl$fitted.values
The value of mu for the negative binomial component can be checked by

hand using Stata code (for the first two observations). Note how the coefficient
and component levels are declared:
. di exp([#2]_b[outwork]*0 + [#2]_b[age]*54 + [#2]_b[_cons])
3.349409
. di exp([#2]_b[outwork]*1 + [#2]_b[age]*44 + [#2]_b[_cons])
3.7985435
Marginal effects may be obtained for hurdle models as well. See Hilbe
(2011) for guidelines and example code on how to construct and interpret
hurdle model marginal effects. Briefly, however, for both Stata and R (see
Table 7.5) it is easiest to obtain separate marginal effects for each component. For example, given the NB2-logit model we just reviewed, to obtain
marginal effects at means for the negative binomial component, we do as
follows:
STATA CODE
. ztnb docvis i.outwork age if docvis0
. margins, dydx(*)
atmeans noatlegend
and for the logit component

. gen visit = docvis0
. logit visit i.outwork age
. margins, dydx(*) atmeans noatlegend
If you prefer to use the margins command after a hurdle command

(perhaps you dont have a zero), you still need to call the margins command
twice, once for each component. The default display of marginal effects is the
192
PROBLEMS WITH ZEROS
binary component (equation #1). Either type the same command as done
previously or one for each component,
. margins, dydx(*) atmeans noatlegend predict(equation(#1))
. margins, dydx(*) atmeans noatlegend predict(equation(#2))
Note that if an older command is used that does not support the i. prefix
for factor variables, use the tabulate command as
. tab outwork, gen(outwork)
and use outwork1 in the model.
7.2.2 PIG-Logit and Poisson Log-Normal Hurdle Models

Poisson and negative binomial logit models have been in use for a number of
years now. I have found no previous mention in the literature of a Poisson
inverse Gaussian-logit hurdle model, or PIG-logit hurdle. In fact, the PIG
has not been associated with any binary component in the construction of a
hurdle model of which I am aware.
The PIG-logit hurdle model will likely be of use to those who have a
substantial amount of variability in the model more than is accounted for
by simply adjusting the zero components in the model. I will use the same
data as for the Poisson model, but realize that they are not ideal data for this
model.
We continue to use the same logit model as before. Now, however, we use
a zero-truncated PIG on the data, just as we did when constructing the two
components of the hurdle model ourselves. Remember that it is mandatory
to exclude zero counts from the estimation with docvis 0, since the zerotruncated model assumes that no zero counts exist:
. ztpig docvis outwork age if docvis0, nolog
Zero-truncated PIG regression
Number of obs
LR chi2(2)
Prob chi2
=
=
=
3874
73.90
0.0000

Pseudo R2
=
0.0064
-----------------------------------------------------------------------docvis |
Coef.
Std. Err.
z
P|z|
-------------+----------------------------------------------------------
193
outwork | .2933067
age | .0147178
_cons | .6937237
.0604065
.0026478
.1221457
4.86
5.56
5.68
0.000
0.000
0.000
.1749122
.0095282
.4543225
.4117011
.0199073
.9331248
-------------+---------------------------------------------------------/lnalpha | .4436434
.0637793
.3186383
.5686485
-------------+---------------------------------------------------------alpha | 1.558375
.099392
1.375254
1.765879
-----------------------------------------------------------------------Likelihood-ratio test of alpha=0:
chibar2(01) = 7838.96
. abich
AIC Statistic
BIC Statistic
=
=
5.039261
5.040627
AIC*n
= 11403.847
BIC(Stata) = 11426.745
AICH Statistic
5.036855
AICH*n
= 11394.568
The PIG-logit hurdle can be constructed by placing the two components

together. The AICn statistic can be calculated for the hurdle model as
. di 11403.847+5101.605
16505.452
and AIC as 16505.452/3874 = 4.261. We calculated it for the NB-logit hurdle

using the hnblogit command. The AIC statistic is 4.029 and AICn is
16619.46. The PIG-logit mode is definitely a better fit to the data than the
Poisson-logit or NB-logit:
-----------------------------------------------------------------------visit |
Coef. Std. Err.
z
P|z|
------------+----------------------------------------------------------outwork | .5247119 .0718972
7.30
0.000
.383796
.6656278
age | .0263374 .0030821
8.55
0.000
.0202966
.0323782
_cons | -.9935545 .1351158
-7.35
0.000 -1.258377 -.7287324
----------------------------------------------------------------------------------------------------------------------------------------------docvis |
Coef. Std. Err.
z
P|z|
------------+----------------------------------------------------------outwork |
age |
_cons |
.2933067
.0147178
.6937237
.0604065
.0026478
.1221457
4.86
5.56
5.68
0.000
0.000
0.000
.1749122
.0095282
.4543225
.4117011
.0199073
.9331248
------------+----------------------------------------------------------/lnalpha | .4436434 .0637793

.3186383
.5686485
------------+----------------------------------------------------------alpha | 1.558375
.099392
1.375254
1.765879
------------------------------------------------------------------------
194
PROBLEMS WITH ZEROS
The Poisson log-normal hurdle may be calculated in the same manner. The
preceding logit model will be the same model used here as well:
. ztpnm docvis outwork age if docvis0,
Zero-truncated Poisson normal mixture model
Number of obs
2263
Wald chi2(2)
Prob chi2
=
=
73.22
0.0000
-----------------------------------------------------------------------docvis |
Coef.
Std. Err.
z
-------------+---------------------------------------------------------outwork |
age |
_cons |
.2398099
.0117142
.5241504
.0496063
.0021539
.099247
4.83
5.44
5.28
0.000
0.000
0.000
.1425833
.0074927
.3296299
.3370365
.0159358
.7186708
-------------+---------------------------------------------------------/lnsigma | -.0650437
.022556 -2.88
0.004 -.1092526 -.0208348
-----------------------------------------------------------------------sigma |
.9370265
.0211355
44.33
0.000
.896504
. abich
AIC Statistic
BIC Statistic
=
=
5.039033
5.040399
AIC*n
= 11403.333
BIC(Stata) = 11426.23
AICH Statistic
5.036628
AICH*n
. di 11403.333+5101.605
.9793807
= 11394.055
/// AIC value
16504.938
The AICn value is nearly identical to that for the PIG-logit hurdle model.
I also tested the generalized NB-Plogit hurdle, with the result that its AIC
value (16629.17) is substantially higher than for the PIG or log-normal hurdle
models.
7.2.3 PIG-Poisson Hurdle Model

Our last example is of a PIG-Poisson model. How can we do that? Which
model is the binary model? Its the Poisson model. We can perform a right
censored at 1 Poisson model. Here I use the cpoissone censored count
model I published in the late 1990s. Since then, James Hardin and I have
written a general censored count model command that can be used for left,
right, or interval censoring. We have done the same for a truncated model,
195
which is used in Chapter 9. This is a very powerful way to handle hurdle

models, but the interpretation is a bit difficult:
STATA CODE
. gen rcen=1
. replace rcen=-1 if docvis=1
. cpoissone docvis outwork age, censor(rcen) cright(1) nolog
Censored Poisson Regression
Number of obs
Wald chi2(2)
=
=
3874
171.15

Prob chi2
= 0.0000
-----------------------------------------------------------------------docvis |
Coef.
Std. Err.
z
P|z|
-----------+----------------------------------------------------------outwork | .3418076
.0456266
7.49
0.000
.2523811
.4312342
age |
.0178382
.0020181
8.84
0.000
.0138827
.0217937
_cons | -1.043595
.0915753 -11.40
0.000 -1.223079 -.8641103
-----------------------------------------------------------------------AIC Statistic =
1.316
AICn
5098.184
The overall PIG-Poisson hurdle AIC can be calculated just as for the
previous hurdle models. The AICn for the right censored at 1 Poisson is
5098.184, and from before we know that the AICn of the zero-truncated PIG
is 11403.847. The sum is
. di 5098.184+11403.847
16502.031
/// AIC
which is the lowest AICn value we have calculated. Perhaps a PIG-NB hurdle
would be better, or a PIG-PIG hurdle. I will let you determine the result.
What I hope that you learned from this section is that there are various ways
to model count data.
We could have tried a wide variety of models, such as Poissonlognormal
negative binomial hurdle, or any variety of binary model, such as logit, probit,
complementary loglog, or loglog, or a right censored at 1 count model. The
choice to be used is the one that best fits the data.
Rs pscl package supports the Poisson and negative binomial hurdle
models but no others. I hope to develop R functions that match the Stata
commands used with this book.
196
PROBLEMS WITH ZEROS
7.3 ZERO-INFLATED MIXTURE MODELS

7.3.1 Overview and Guidelines
There are a variety of count data situations that can be modeled using Poisson
regression, and if a model is Poisson overdispersed, as a negative binomial
regression. Negative binomial models can themselves be extradispersed when,
for example, there is more variability in the data than is allowed given the
distributional assumptions of the negative binomial distribution. An easy
first check for negative binomial extradispersion is the Pearson dispersion
statistic provided in the model output of most statistical packages. Users
of Rs glm and glm.nb functions, however, must calculate the statistic
themselves, or use the author-written P__disp.r function. R users may
use the authors nbinomial function, which is part of the msme package,
for negative binomial and heterogeneous negative binomial regression. The
dispersion parameter, Pearson Chi2, and dispersion statistics are provided in
default output.
When zero counts are not possible for the data being collected (e.g., hospital length-of-stay data), it is usually necessary to employ either a zerotruncated Poisson (ZTP) or zero-truncated negative binomial (ZTNB) if the
mean of the response is low. On the other hand, if there are far more observed
zero counts than expected given the mean of the distribution, analysts typically employ a hurdle model, a zero-inflated Poisson (ZIP), or a zero-inflated
negative binomial (ZINB). We have discussed hurdle models in the previous
section and address zero-inflated models in the present one.
Prior to commencing our look at zero-inflated models, it might be instructive to provide a few guidelines:
r There may be times when it is not desirable to use a zero-inflated model
when the data have excessive zero counts. For example, it may be that
a negative binomial or a hurdle model will be all that is needed to best
understand such data or some other model. To appropriately employ a
zero-inflated model on data with excessive zero counts, the analyst should
have a theory as to why there are a class of observations having both
observed and expected zero counts.
r Zero-inflated models can be thought of as finite mixture models (i.e., where
there are supposed two data-generating mechanisms, one generating 0s
and one generating the full range of counts).
197
r There are two different types of 0s in the data one generated by a binary
component modeling 0s and one in the count model component of the

mixture model. Binary 0s have been called bad 0s and count model 0s
good 0s. This distinction is a mathematical fiction but can be made a
meaningful interpretation of zero-inflated models.
r There is ongoing research and discussion concerning the appropriateness
of various fit tests for zero-inflated models, including the boundary likelihood ratio test. The discussion relates to whether one zero-inflated model
can be considered nested within another. We will use the tests, but know
that there is discussion regarding their value in assessing fit.
7.3.2 Fit Tests for Zero-Inflated Models

I will use three primary tests to evaluate each of the zero-inflated models
discussed in this section:
r Boundary likelihood ratio test: a test of one ZI model against another that is
presumably nested in it. An example is ZINB to ZIP, where p-values less

than 0.05 (p 0.05) indicate that the ZINB model is preferable to ZIP.
r Vuong test: a nonnested test of a zero-inflated model against the noninflated
model; for example, ZINB to NB. p-values less than 0.05 (p 0.05) indicate
that the ZINB model is preferable to NB. The test statistic is normally
distributed N(0,1), with large positive values favoring the ZINB model and
large negative values favoring the NB model. If the p-value is not significant,
then we cannot use the test to decide between ZINB or NB. However, the
Vuong test is biased toward favoring the zero-inflated model, for which
correction factors have been developed.
r AIC/BIC tests: be certain to check whether a standard noninflated model
might better fit a zero-inflated model. In particular, it may be that a negative
binomial, PIG, or NB-P model fits the data better than a zero-inflated Poisson or zero-inflated negative binomial. I will generally use the acronyms
for the models from now on to save space.
7.3.3 Fitting Zero-Inflated Models

Recall that the hurdle model is a two-part model where each component can
be modeled separately. The zero-inflated models cannot be separated in that
manner. There are overlapping zeros, which are estimated by both the binary
and count components.
198
PROBLEMS WITH ZEROS
The first component is the binary, which is usually modeled as a logit or

probit. Unlike the hurdle model, though, in which the binary component has
1s consisting of all counts greater than 0 and 0s consisting of the 0 counts
in the data, the zero-inflated models have a binary component with a value
of 1 for all 0s in the data and 0 for all other counts greater than 0. The count
component simply models all of the counts from zero to greater than zero.
In this sense, the binary model is directly modeling the 0s in the data by
revaluing them to 1s. The positive count values are the combined reference
level for the binary model.
The logic of a zero-inflated model is that counts are estimated as
Pr(Y = 0) = Pr(Bin = 0) + (1 Pr(Bin = 0)) Pr(Count = 0)
Pr(Y = 0) = (1 Pr(Bin = 0)) + PDFcount
(7.9)
Since we will use the logit model for the binary component of zero-inflated
models, I can give the logit equation for the probability of 0s as 1(1 +
exp(xb)):
Pr(Bin = 0) =
1
1 + exp(x)
(7.10)
For a zero-inflated Poisson model with a logit binary component, we have

the equation

1
exp( exp(x))
(y = 0) = log
+
1 + exp(xb )
1 + exp(xb )

1
exp(x) + y(x) log (y + 1)
(y 0) = log
1 + exp(xb )
(7.11)
where the b subscript indicates that x is a binary model component and
without the subscript that x is from the count component, in this case
Poisson.
7.3.4 Good and Bad Zeros

The discussion of good and bad zeros comes foremost from ecology, where
interest rests in how we come to know what a zero count is. The logic can
be used for other disciplines as well in health care regarding patients, in
insurance when dealing with insured clients, in transportation in counting
accidents, and so forth.
199
The idea is that 0 counts represent errors. For example, when counting the
number of birdcalls made by a type of bird, zero counts can occur because of
r birds being quiet during the time they were being recorded and
r those for which you didnt record the calls because you were sitting in the
wrong place or were there at the wrong time to observe the calls. Perhaps
you even failed to show up for the recording session.
In this case, the first reason for zero counts represents good counts and
comes from the count component of the model. The second reason, because
no one shows up to do the counting, or because someone had just shot at the
birds and they flew away, or someone shot and killed them, represents bad
zeros, which form the binary component.
There is really no way to tell where the lack of counts came from, but many
ecologists have considered it important to make this type of distinction. I
mention this here since you may read about it in the literature, especially if
researchers from outside ecology start to use this distinction. See Zuur (2012)
for a complete guide to this method.
7.3.5 Zero-Inflated Poisson (ZIP)

We use the same German health data as before, with the same predictors
in each component. Ideally, we would include more predictors and would
model the data using robust standard errors. For pedagogical reasons, we
keep it simple:
. zipcv docvis outwork age, nolog inflate(outwork age)
Zero-inflated Poisson regression
vuong
Number of obs
3874
Nonzero obs
Zero obs
=
=
2263
1611
Inflation model = logit

LR chi2(2)
=
443.03
Prob chi2
=
0.0000
-----------------------------------------------------------------------docvis |
Coef. Std. Err.
z
P|z|
------------+----------------------------------------------------------docvis
|
outwork |
age |
_cons |
.2132031
.0116248
1.043192
.0192091
.0008472
.0396523
11.10
13.72
26.31
0.000
0.000
0.000
.1755539
.0099643
.9654749
.2508522
.0132852
1.120909
------------+-----------------------------------------------------------
200
PROBLEMS WITH ZEROS
inflate
|
outwork | -.5145616
age | -.025714
.0724867
.0031096
-7.10
-8.27
0.000
0.000
-.6566328
-.0318087
-.3724904
-.0196192
_cons | .9453518 .1365165

6.92
0.000
.6777844
1.212919
-----------------------------------------------------------------------Vuong test of zip vs. standard Poisson: z = 19.26 Prz = 0.0000
with AIC (Akaike) correction: z =
19.24
with BIC (Schwarz) correction: z =
19.19
. abic
AIC Statistic
6.2837
BIC Statistic
6.286153
Prz = 1.0000
Prz = 0.0000
Prz = 1.0000
Prz = 0.0000
Prz = 1.0000
= 24343.055
AIC*n
BIC(Stata) = 24380.627
The rate ratios for the count component of the preceding table of model
statistics can be displayed as
. zip, irr
Zero-inflated Poisson regression
Number of obs
Nonzero obs
Zero obs
=
=
=
3874
2263
1611

LR chi2(2)
=
443.03
Prob chi2
=
0.0000
-----------------------------------------------------------------------docvis |
IRR
Std. Err.
z
-------------+---------------------------------------------------------docvis
|
outwork |
age |
_cons |
1.237636
1.011693
2.838262
.0237739
.0008571
.1125436
11.10
13.72
26.31
0.000
0.000
0.000
1.191906
1.010014
2.626034
1.28512
1.013374
3.067641
-------------+---------------------------------------------------------inflate
|
outwork | -.5145616 .0724867
-7.10
0.000 -.6566328 -.3724904
age | -.025714 .0031096
-8.27
0.000 -.0318087 -.0196192
_cons | .9453518 .1365165
6.92
0.000
.6777844
1.212919
-----------------------------------------------------------------------Vuong test of zip vs. standard Poisson: z =
19.26
Prz = 0.0000
The Vuong test, displayed directly under the Stata model output, aims to
test whether ZIP is preferable to the traditional Poisson model. A resulting
p-value of under 0.05 provides evidence that the ZIP model is preferred
(i.e., the number of zero counts exceeds Poisson distributional assumptions).
201
TABLE 7.6. R: ZIP

data(rwm5yr) ; rwm1984 - subset(rwm5yr, year==1984)
poi - glm(docvis ~ outwork + age, data=rwm1984, dist="poisson")
zip - zeroinfl(docvis ~ outwork + age | outwork + age, data=rwm1984,
dist="poisson")
summary(zip)
print(vuong(zip,poi))
exp(coef(zinp))
round(colSums(predict(zip, type="prob")[,1:17]))
rbind(obs=table(rwm1984$docvis)[1:18])
# expected counts
# observed counts
Two correction tests for the Vuong statistic are displayed by using the zipcv
command (Desmarais and Harden 2013). The Vuong statistic is biased toward
the zero-inflated model because the same data are used to estimate both the
binary and count component parameters. AIC- and BIC-based correction
factors adjust for the extra parameters in the zero-inflated component. The
AIC correction factor tends to prefer the zero-inflated model when it is correct,
but it does not always reject the zero-inflated model when it is not correct;
the BIC correction factor tends to prefer the single-equation model when it
is correct. Interpret the tests with care. I refer you to Desmarais and Harden
(2013) for details. The correction factors are not yet available in R or SAS. For
this model, the standard Vuong and both correction tests provide support for
the ZIP model.
Next, calculate the predicted counts of the count component and predicted probability of the binary component, which we have specified as a
binary logistic model. Recall that zero counts are modeled in both the binary
and count components, resulting in a mixture of distributions. This mixture of zeros from both the binary and count model components must be
accommodated when calculating the predicted counts.
The predicted probability of the binary logistic component of the ZIP
model is calculated straightforwardly using the inverse logistic link, 1(1 +
exp(xb)) or exp(xb)(1 + exp(xb)):
STATA CODE
. predict prob
/* predicted count */
. gen xb_c = [docvis]_cons + [docvis]_b[outwork] *outwork +

[docvis]_b[age]*age
. gen xb_b = [inflate]_cons + [inflate]_b[outwork]*outwork +
[inflate]_b[age]*age
. gen pr0 = 1/(1+exp(-xb_b))
202
PROBLEMS WITH ZEROS
The predicted counts for the count component, however, reflect the mixture of zeros. The Poisson inverse link, exp(xb), defines the predicted counts,
but each count observation must be adjusted by 1 minus the predicted probability of being in the binary component:
. gen prcnt=exp(xb_c)*(1-pr0)
. su docvis prob prcnt pr0
Variable |
Obs
Mean
Std. Dev.
Min
Max
-----------+--------------------------------------------------------docvis |
3874
3.162881
6.275955
0
121
prob |
prcnt |
pr0 |
3874
3874
3874
3.160131
3.160131
.4116941
1.140611
1.140611
.0980708
1.612873
1.612873
.2288347
5.70035
5.700351
.5750543
Note that the AIC and BIC statistics are 6.28. These values are substantially lower than the Poisson model AIC and BIC of 8.07 but much higher
than the negative binomial value of 4.30. A negative binomial model of the
data, regardless of the excessive zero counts, is better than either standard
Poisson or ZIP models. Given that ZIP is preferable to Poisson, however, it is
reasonable to assume that a ZINB model will be preferable to an NB model.
A table of expected counts can be given for the hurdle model, which can
be compared with the observed counts:
R CODE
pred - round(colSums(predict(zip, type="prob") [,1:13]))
obs - table(rwm1984$docvis)[1:13]
rbind(obs, pred)
obs
0
1
2
3
4
5
6
1611 448 440 353 213 168 141
pred 1611
7
60
8
85
9 10 11 12
47 45 33 43
75 177 285 355 364 321 250 176 114 68 38 20
7.3.6 Zero-Inflated Negative Binomial (ZINB)

. zinb docvis outwork age, nolog inflate(outwork age) zip vuong irr
Zero-inflated negative binomial regression
Number of obs
3874
Nonzero obs
Zero obs
=
=
2263
1611
203

LR chi2(2)
=
108.45
Prob chi2
=
0.0000
-----------------------------------------------------------------------docvis |
IRR
Std. Err.
z
P|z|
------------+----------------------------------------------------------docvis
|
outwork |
age |
1.334501
1.018774
.0839373
.0028387
4.59
6.68
0.000
0.000
1.179723
1.013226
1.509585
1.024353
_cons |
1.356756
.1847742
2.24 0.025
1.038911
1.771844
------------+----------------------------------------------------------inflate
|
outwork |
age |
_cons |
-1.312531
-.0318529
-.2309631
.6455665
.0119638
.5240838
-2.03
-2.66
-0.44
0.042
0.008
0.659
-2.577818
-.0553015
-1.258149
-.0472438
-.0084043
.7962223
------------+----------------------------------------------------------/lnalpha |
.5832367
.0677161
8.61 0.000
.4505156
.7159578
------------+----------------------------------------------------------alpha |
1.791829
.1213356
1.569121
2.046146
Pr=chibar2 = 0.0000
Vuong test of zinb vs. standard negative binomial: z =
2.61
Prz = 0.0046 =
with AIC (Akaike) correction: z =
2.11
with BIC (Schwarz) correction: z =
. abic
AIC Statistic
4.297291
BIC Statistic
4.30071
AIC*n
0.58
Prz = 0.9954
Prz = 0.0172
Prz = 0.9828
Prz = 0.2824
Prz = 0.7176
= 16647.707
BIC(Stata) = 16691.541
. predict prob /* predicted count */

. gen xb_c = [docvis]_cons + [docvis]_b[outwork] *outwork +
[docvis]_b[age]*age
. gen xb_b = [inflate]_cons + [inflate]_b[outwork]*outwork +
[inflate]_b[age]*age
. gen pr0 = 1/(1+exp(-xb_b))
The predicted counts for the count component reflect the mixture of zeros.
The negative binomial inverse link, exp(xb), defines the predicted counts, but
each count observation must be adjusted by 1 minus the predicted probability
204
PROBLEMS WITH ZEROS
TABLE 7.7. R: ZINB

nb2 - glm.nb(docvis ~ outwork + age, data=rwm1984)
zinb - zeroinfl(docvis ~ outwork + age | outwork + age, data=rwm1984,
dist="negbin")
summary(zinb)
print(vuong(zinb,nb2))
exp(coef(zinb))
pred - round(colSums(predict(zinb, type="prob")[,1:13]))
# expected counts
obs - table(rwm1984$docvis)[1:13]
rbind(obs, pred)
# observed counts
of being in the binary component:

. gen prcnt=exp(xb_c)*(1-pr0)
. su docvis prob prcnt pr0
Variable |
Obs
Mean
Std. Dev.
Min
Max
------------+--------------------------------------------------------docvis |
3874
3.162881
6.275955
0
121
prob |
prcnt |
pr0 |
3874
3874
3874
3.161081
3.161082
.1299529
1.162163
1.162163
.073266
1.590592
1.590592
.0270649
5.792892
5.792892
.2636108
R code is given in Table 7.7, and partial output follows the table:
R OUTPUT
Count model coefficients (negbin with log link):
(Intercept)
outwork
age
Log(theta)

0.305096
0.136207
2.240
0.0251 *
0.288557
0.062889
4.588 4.47e-06 ***
0.018600
-0.583239
0.002786
0.067736
6.676
-8.610
2.45e-11 ***
2e-16 ***
Zero-inflation model coefficients (binomial with logit link):

(Intercept) -0.23096
outwork
-1.31252
age
-0.03185
0.52445
0.64614
0.01196
-0.440
-2.031
-2.664
0.65966
0.04222 *
0.00772 **
---
Downloaded from Cambridge Books Online by IP 155.54.213.67 on Fri Jun 05 18:50:54 BST 2015.
http://dx.doi.org/10.1017/CBO9781139236065.008
Cambridge Books Online Cambridge University Press, 2015
205
Signif. codes:
0 *** 0.001 ** 0.01 * 0.05 . 0.1 1
Theta = 0.5581
Number of iterations in BFGS optimization: 26
Log-likelihood: -8317 on 7 Df
print(vuong(zinb,nb2))
Vuong Non-Nested Hypothesis Test-Statistic: 2.60572
(test-statistic is asymptotically distributed N(0,1) under the
null that the models are indistinguishable)
in this case:
model1 model2, with p-value 0.00458407
exp(coef(zinb))
count_(Intercept)
1.3567548
count_outwork
1.3345011
zero_outwork
0.2691399
zero_age
0.9686489
count_age
1.0187743
zero_(Intercept)
0.7937695
OBSERVED AND EXPECTED OR PREDICTED ZINB COUNTS

rbind(obs, pred)
0
1
2
3
4
5
6
7 8 9 10 11 12
obs 1611 448 440 353 213 168 141 60 85 47 45 33 43
pred 1625 535 357 261 199 156 124 100 82 67 56 46 39
ZINB models may be compared with ZIP models using the boundary likelihood test, with p-values less than 0.05 indicating that the ZINB model is
preferable to ZIP. ZINB models may be compared with NB (NB2) models by
using the Vuong test. p-values less than 0.05 indicate that the ZINB model is
preferable to NB. The test statistic is normally distributed, with large positive
values favoring the ZINB model and large negative values favoring the NB
model. An insignificant test result favors neither model.
The likelihood ratio test assesses the relationship of ZINB to ZIP. Here the
test clearly prefers ZINB. The uncorrected Vuong and AIC-corrected tests
show that the ZINB model is preferable to the standard negative binomial
model (p = 0.0046 and p = 0.0172, respectively). The BIC-corrected Vuong
prefers neither (p = 0.2824). The standard negative binomial AIC and BIC
statistics are 16673.525 and 16698.572, which gives a 26-point drop in the
AIC statistic for the ZINB model compared with the standard NB model,
but only a 7-point drop in the BIC statistic. Given the AIC-corrected Vuong
statistic preferring the ZI model and the BIC-corrected statistic preferring
neither, it is likely reasonable to give an overall slight preference to ZINB.
The difference in test results should be acknowledged in a study report.
206
PROBLEMS WITH ZEROS
Note that the binomial (logistic) component that models the zero counts
does not exponentiate the coefficients, generating odds ratios. I recommend
that this be done. The standard errors of the odds ratios are determined by
multiplying each respective odds ratio by its associated model SE. Confidence
intervals are exponentiated, as are the coefficients.
7.3.7 Zero-Inflated Poisson Inverse Gaussian (ZIPIG)

If the counts are distributed such that there are many counts in the lower
range of numbers, with a long right skew, then a Poisson inverse Gaussian
model may be preferable. From a look at the tabulated count values, this may
indeed be the case:
. zipig docvis outwork age, nolog inflate(outwork age) vuong zip irr
Zero-inflated Poisson inverse gaussian regression
Number of obs
Nonzero obs
Zero obs
LR chi2(2)
3874
=
=
=
2263
1611
83.16

Prob chi2
= 0.0000
-----------------------------------------------------------------------docvis |
IRR Std. Err.
z
P|z|
-------------+---------------------------------------------------------docvis
|
outwork |
1.343885
.0824651
4.82
0.000
1.191597
1.515635
age | 1.015202 .0026721

5.73 0.000
1.009978
1.020453
_cons | 1.965736 .2368998
5.61 0.000
1.552183
2.489472
-------------+---------------------------------------------------------inflate
|
outwork | -.5030342
.1153151
-4.36
0.000
-.7290476
-.2770207
age | -.024547 .0047009

-5.22 0.000 -.0337607 -.0153334
_cons | .3784043 .2047753
1.85 0.065 -.0229479
.7797565
-------------+---------------------------------------------------------/lnalpha | .4433829 .0638008
6.95 0.000
.3183356
.5684302
-------------+---------------------------------------------------------alpha | 1.557969 .0993997
1.374838
1.765493
Pr= chibar2 = 0.0000
Vuong test of zipig vs. poisson inverse gaussian:
z = 8.81 Prz = 0.0000
207
Bias-corrected (AIC) Vuong test:

Bias-corrected (BIC) Vuong test:
z =
z =
8.61
7.99
Prz = 0.0000
Prz = 0.0000
. abic
AIC Statistic
4.260713
AIC*n
BIC Statistic
4.264132
BIC(Stata) = 16549.836
= 16506.002
Predicted counts and zeros are obtained by

. predict prpc, n
. predict prp0, pr
. su docvis prpc prp0
Variable |
Obs
Mean
Std. Dev.
Min
Max
------------+--------------------------------------------------------docvis |
3874
3.162881
6.275955
0
121
prpc |
prp0 |
3874
3874
3.167142
.2987763
1.266035
.0992726
1.37824
.1334178
6.192106
.489595
R
======================================================
library(gamlss) ; data(rwm1984); attach(rwm1984)
summary(zpig - gamlss(docvis ~ outwork + age, nu.fo= ~ outwork + age,
family=ZIPIG, data=rwm1984))
# code for calculating vuong, LR test, etc. on books web site
=======================================================
The AIC and BIC values are some 140 points lower than that of the zeroinflated negative binomial (ZINB), and 50 points lower than the zero-inflated
generalized Poisson (ZIGP) (examined in the following chapter). Moreover,
the Vuong test favors the ZIPIG model over the PIG. The test statistic is
normally distributed, with large positive values favoring the ZIPIG model
and large negative values favoring the PIG model. The likelihood ratio test is
also significant, comparing the ZIPIG with the zero-inflated Poisson (ZIP).
The test clearly prefers ZIPIG to any of the models we have thus far used. To
be sure, the excess of zero counts significantly impacts model overdispersion.
7.4 SUMMARY FINDING THE OPTIMAL MODEL

We have gone through a number of different zero-truncated, zero-inflated,
and hurdle models. Zero-truncated models are used primarily when the count
208
PROBLEMS WITH ZEROS
response variable structurally has no capability of having zero counts and

where the mean of the distribution is low (e.g., under 4 or 5). Zero-truncated
models are also used in the construction of hurdle models. Specialized software for zero truncation may be used, or a general truncation command or
function that is set at a truncation at 0 may be used for the truncated at zero
component.
Hurdle models are used for count data that have more or fewer zeros than
are assumed on the basis of the distribution of the count component. The
standard hurdle model consists of a binary component and a count component, which may be estimated separately or as a single algorithm. However,
the fitting algorithm of a hurdle model typically estimates both components
separately, combining them at the point of displaying results to the screen.
The idea is that there is first a binary data-generating mechanism that produces 0 counts until some transition stage occurs, which starts an event
mechanism generating positive counts. That is, when the binary transition
1 occurs, counts are generated using a zero-truncated count model.
The binary component is usually constructed as a binary logit or probit
model with 1 equal to all nonzero values of the response variable and 0
otherwise, and a zero-truncated count model. However, the count component
may also be formed by a right censored at 1 count model. I showed an example
of setting up such a model with a PIG-Poisson hurdle. It was a substantially
better fit than the other hurdle models we considered for the example data.
A double hurdle model may be constructed from a combination of truncated models; for example, a double Poisson-logit hurdle model will have a
1/0 logit model as a standard hurdle, but then an interval truncated model
with cut points at 0 and at the next hurdle point, and then a left-truncated
model from the second hurdle point to the highest count. This can be done
for truncated models with the software we address in Chapter 9.
I should also mention that a hurdle model is an appropriate model to use
when the count response variable has either fewer or greater zero counts than
are expected based on the distributional assumptions of the model.
Finally, a zero-inflated model is a mixture model that may also be referred
to as a type of finite mixture model. A zero-inflated model is used when
there are excessive zero counts in the data, and generally when one has
a theory for why there are so many zeros. When using them, care must
be taken to make sure that no other models exist that fit as well or better.
The standard zero-inflated models include the Poisson and negative binomial
models. We have discussed several other zero-inflated models (e.g., ZI PIG,
209
TABLE 7.8. Comparative Fit of rwm1984 Data

AICn
BIC
AICHn
Model
ZIP
ZINB
NB-L hurdle
24343.055
16647.707
16628.650
24380.627
16691.541
16672.484
24328.791
16630.223
16611.166
ZINBP
ZIHNB
16625.041
16624.355
16675.139
16680.713
16603.963
16599.256
ZIGP
16559.494
16603.328
16542.010
ZIPIG
16506.002
16549.836
16488.520
Pig-P hurdle
16502.031
16547.136
16489.821
ZI Poisson
ZI negative binomial
negative binomial-logit
hurdle
ZI NB-P
ZI heterogeneous negative
binomial
ZI generalized Poisson
(from Chap. 8)
ZI Poisson inverse
Gaussian (PIG)
PIG-Poisson hurdle
ZI generalized Poisson, ZI NB-P, and ZI heterogeneous NB). A zero-inflated

generalized Waring regression is discussed in Chapter 9.
So, when do we model data with an excess of 0 counts with a hurdle model
or a zero-inflated model? If there is a real separation of mechanisms producing
the 0s and the positive counts, a hurdle model appears best. If there is an
overlap of 0 values, then a zero-inflated model may be the best choice. Of
course, the model having substantially lower information test statistics should
be preferred, other considerations being equal. Keep in mind that a hurdle
model is a two-part model, and a zero-inflated model a mixture of models.
It should also be mentioned that of all the zero-inflated models we have
tried with the rwm1984 data, the zero-inflated PIG appears to be the bestfitted model (see Table 7.8). A PIG-Poisson hurdle model, however, has
slightly lower AIC and BIC values, but not enough to decide that it is a
better-fitted model. The decision of which model to select should be based
on context and how the models are to be interpreted.
CHAPTER 8
Modeling Underdispersed
Count Data Generalized
Poisson

r How does a generalized Poisson model underdisperse?
r What is the relationship between the Poisson and generalized Poisson
models?
r Is the generalized Poisson a mixture model? If so, what are the component
distributions? How can a count model be used as a binary component of a

hurdle model?
An analyst rarely encounters underdispersed Poisson data when dealing with
real data. But it does happen, and several journal articles have been authored
that use one method or another to provide parameter estimates for underdispersed data.
The problem with not paying attention to data that are underdispersed and
modeling them by normal means is that the standard errors of the resulting
model are overestimated. This leads to thinking that predictors are not significant when in fact they are. Normally, standard errors are overdispersed,
210
211
Percent
5
10
LOS for Full Heart Procedure Data
10
Mean
15
20
LOS
25
30
35
FIGURE 8.1. LOS for full heart procedure data.
leading an analyst to believe that predictors are significant when in fact they
are not.
The generalized Poisson probability function is based on Consul (1989)
and Famoye (1993), and this parameterization on Harris, Yang, and Hardin
(2012):
f (y; , ) =
i (i + yi ) yi 1 e i yi
, yi = 0, 1, 2, . . .
yi !
(8.1)
The types of count data that are underdispersed consist of data that are lumped
more tightly together than should be expected based on Poisson and negative
binomial distributional assumptions. Consider the azprocedure data that is
on the books web site. This data set is a record of how long patients were
in the hospital following either a CABG (1) or PTCA (percutaneous transluminal coronary angioplasty) (0) procedure. Other predictors are sex (1 =
male; 0 = female) and admit (1 = emergency/urgent; 0 = elective). We have
212
MODELING UNDERDISPERSED COUNT DATA
found that it is rather severely overdispersed at 3.23, with a mean length of

hospital stay of 8.2 days:
. sum los
Variable |
Obs
Mean
Std. Dev.
Min
Max
-------------+-------------------------------------------------------------los |
3589
8.830872
6.926239
83
. hist los if los40, title("LOS for full Heart Procedure Data") discrete
xlab( 5 8.83 "mean" 10 15 20 25 30 35) percent
POISSON REGRESSION
. glm los procedure sex admit, nolog fam(poi) vce(robust) nohead nolog eform
---------------------------------------------------------------------------|
Robust
los |
IRR
Std. Err.
P|z|
----------+----------------------------------------------------------------procedure |
2.604873
.0567982
43.91
0.000
2.495896
2.718608
sex |
.8779003
.0195083
-5.86
0.000
.8404854
.9169806
admit |
1.395248
.0297964
15.60
0.000
1.338054
1.454887
_cons |
4.443334
.1174981
56.40
0.000
4.218908
4.679698
--------------------------------------------------------------------------. abich
AIC Statistic
6.264283
AIC*n
BIC Statistic
6.265144
BIC(Stata) = 22507.256
. di e(dispers_p)
= 22482.514
// Dispersion
3.2323804
. di e(N)
// Number of observations in model
3589
Ill next drop all lengths of stay greater than 8 days, which amounts to
1607 patients. That leaves 982 remaining, with a new mean LOS of 4.46 days.
The dispersion has dropped to 0.79, indicating underdispersion:
. drop if los8
. sum los
Variable |
Obs
Mean
Std. Dev.
Min
Max
-------------+---------------------------------------------------------los |
1982
4.465691
2.30982
A Poisson model on the data clearly demonstrates that the data are underdispersed:
213
. glm los procedure sex admit, nolog fam(poi) vce(robust) eform

No. of obs
1982
Optimization
: ML
Deviance
1574.440006
Residual df
=
Scale parameter =
(1/df) Deviance =
1978
1
.7959757
Pearson
1562.747889
(1/df) Pearson
AIC
BIC
= .7900647
= 4.020972
= -13442.26
-----------------------------------------------------------------------|
Robust
los |
IRR
Std. Err.
z
P|z|
----------+------------------------------------------------------------procedure | 2.077086
.0344479
44.07
0.000
2.010655
2.145712
sex | .9333992
.0185912
-3.46
0.001
.8976632
.9705579
admit |
_cons |
1.363049
3.276827
.0249235
.0690439
16.94
56.33
0.000
0.000
1.315064
3.14426
1.412784
3.414984
-----------------------------------------------------------------------. abich
AIC Statistic
=
4.020972
AIC*n
= 7969.5674
BIC Statistic
4.022532
BIC(Stata) = 7991.9346
Now, lets see if the generalized Poisson model picks up on the underdispersion. Remember, a negative binomial model cannot model data that are
underdispersed. If it does succeed in estimating parameters, they are at the
values of a Poisson model:
. gpoisson los procedure sex admit, nolog
vce(robust)
Generalized Poisson regression
Number of obs
Wald chi2(3)
=
=
1982
1891.88
Prob chi2
Pseudo R2
=
=
=
0.0000
0.0000
0.1052
Prob chi2
Dispersion
= -.1195314
-----------------------------------------------------------------------|
Robust
los |
IRR
Std. Err.
z
P|z|
-----------+-----------------------------------------------------------procedure | 2.051253
.0343166
42.94
0.000
1.985085
2.119628
sex |
.934638
.0186265
-3.39
0.001
.8988346
.9718675
admit | 1.366056
.0255772
16.66
0.000
1.316835
1.417118
_cons | 3.281648
.0706452
55.20
0.000
3.146066
3.423072
-----------+------------------------------------------------------------
214
/tanhdelta | -.1201056
.0150796
-.1496611 -.0905502
-----------+-----------------------------------------------------------delta | -.1195314
.0148641
-.1485536 -.0903035
-----------------------------------------------------------------------Likelihood-ratio test of delta=0: chi2(1) = 48.81 Prob=chi2 = 0.0000
. abich
=
=
AIC Statistic
BIC Statistic
AIC*n
= 7922.7588
BIC(Stata) = 7950.7183
3.997356
4.000431
The AIC and BIC statistics are reduced, and the value of the dispersion
parameter, delta, is negative, indicating the dispersion parameter has adjusted
for underdispersion. Note that /tanhdelta is the inverse hyperbolic tangent
function of delta, with a definition of

1+
1
(8.2)
tanhdelta = log
2
1
The dispersion parameter for the generalized Poisson is
=
1
(1 )2
(8.3)
When = 0, the model is equidispersed (i.e., it is Poisson). If 0, the

model is overdispersed; if 0, the model is underdispersed. A likelihood
ratio test of = 0 is similar to the likelihood ratio test of the negative binomial,
which is a test of = 0. In this sense, = . p-values less than 0.05 favor the
generalized Poisson over the Poisson.
Zero-inflated generalized Poisson (ZIGP) models are appropriate for modeling any type of extradispersed count data. Negative values of delta adjust for
Poisson underdispersion; positive values adjust for Poisson overdispersion. I
will revert to an evaluation of the rwm1984 data, which are overdispersed:
. zigp docvis outwork age, nolog inflate(outwork age) vuong zip eform
Zero-inflated generalized Poisson regression
Number of obs
3874
Regression link:
Nonzero obs
2263
Inflation link : logit
Zero obs
1611
LR chi2(2)
84.55
Prob chi2
0.0000
-------------------------------------------------------------------------docvis |
exp(b)
Std. Err.
P|z|
------------+------------------------------------------------------------docvis
outwork |
1.369381
.1089162
3.95
0.000
1.171716
1.600391
215
age |
1.014631
.0032109
4.59
0.000
1.008357
1.020944
_cons |
1.79139
.2550683
4.09
0.000
1.355162
2.36804
------------+------------------------------------------------------------inflate
outwork | -.3160915
.2510973
-1.26
0.208
-.8082332
.1760502
age | -.0194765
.0093451
-2.08
0.037
-.0377926
-.0011604
_cons | -.3925934
.398819
-0.98
0.325
-1.174264
.3890774
------------+------------------------------------------------------------atanhdelta
_cons |
.7741937
.0171378
45.17
0.000
.7406042
.8077831
------------+------------------------------------------------------------delta |
.6493614
.0099113
.6295101
.6683655
------------+------------------------------------------------------------X2 =
7785.56
PrX2= 0.0000
z =
3.89
Prz = 0.0000
Bias-corrected (AIC) Vuong test:
z =
3.50
Prz = 0.0002
Bias-corrected (BIC) Vuong test:
z =
2.28
Prz = 0.0114
LR test of delta=0 (zigp versus zip):

Vuong test of zigp vs. gen Poisson:
. abic
AIC Statistic
4.274521
AIC*n
BIC Statistic
4.277939
BIC(Stata) = 16603.328
= 16559.494
Predicted counts and zeros are obtained by using the gpois_p and predict commands.
. gpois_p prgc, n
. predict prg0, pr
. sum docvis pr*
Variable |
Obs
Mean
Std. Dev.
Min
Max
-------------+-------------------------------------------------------docvis |
prcg |
prc0 |
3874
3874
3874
3.162881
3.930725
.2074883
6.275955
1.020594
.0466571
0
2.575682
.1239893
121
6.214907
.2932782
The likelihood ratio test of = 0 at the bottom of the output assesses

the scale parameter of the counting process. In effect, this test determines
whether there is a significant preference for ZIGP over the ZIP model for
these data. ZIGP is preferred.
The Vuong test assesses whether there is a significant preference for the
ZIGP model over the generalized Poisson (GP). The test statistic is normally
distributed, with large positive values favoring the ZIGP model and large
216
negative values favoring the GP model. In both cases, there is strong evidence
for preferring the ZIGP model. It is obvious that excessive zero counts need
to be adjusted. The AIC and BIC statistics have been reduced to 4.275 and
4.278, respectively, demonstrating that the ZIGP model is preferable to a
ZPNB model for these data.
SUMMARY
The generalized Poisson model can be used to adjust for overdispersion in an
otherwise Poisson model, in a similar manner to negative binomial regression.
It can also be used to model otherwise underdispersed Poisson data. Hurdle
models and 3-parameter count models can also be used for undispersed
count data, but a generalized Poisson model can be interpreted more easily
than these other methods. When the dispersion parameter, delta, is positive,
the model has adjusted for overdispersed data; when it is negative, it has
adjusted for underdispersed data. The extent of over or under dispersion can
be roughly evaluated by the magnitude of the value of delta.
Underdispersion, in the sense of Poisson underdispersion, is not commonly found in real data situations. A common, ad hoc manner of dealing
with underdispersion has been to scale the standard errors of the underdispersed Poisson model. This produces standard errors that would be the case
if the data were not underdispersed. This method, however, does not affect
coefficients, only standard errors. It is preferable to assume that the underdispersed data has been generated, or can be best described, by the generalized
Poisson PDF, which specifically allows for Poisson underdispersed data. More
complex models can also be used in such situations, but typically the generalized Poisson model is sufficient to use when faced with underdispersed
data.
CHAPTER 9
Complex Data: More

Advanced Models
In this final chapter, I briefly discuss models that have been developed for
data that are generally more complex than what we have thus far observed.
The sections are meant to introduce you to these methods if you have not
already read about them or used them.
The following list shows the types of data situations with which you may be
confronted, together with a type of model that can be used in such a situation
(given in parentheses).
TYPES OF DATA AND PROBLEMS DEALT WITH IN THIS CHAPTER

r Data sets are small and count data highly unbalanced. (exact Poisson)
r Counts have been truncated or censored at the left, right (highest values),
or middle areas of the distribution. (truncated and censored Poisson and

NB models)
r The count response appears to have two or more components, each being
generated by a different mechanism. (finite mixture model)
r One or more model predictors are ill-shaped, needing smoothing. (GAM
smoothers)
217
218
COMPLEX DATA: MORE ADVANCED MODELS
r Counts are erratically distributed and do not appear to follow a parametric
count distribution very well. (quantile count models)
r Data are longitudinal or clustered in nature, where observations are not
independent. (panel models; e.g., GEE, GLMM)
r Data are nested in levels or are in a hierarchical structure. (multilevel
models)
A very brief overview of the Bayesian modeling of count data will be presented
in Section 9.8.
9.1 SMALL AND UNBALANCED DATA EXACT POISSON

REGRESSION
Exact statistics is a highly iterative technique that uses the conditional distributions of the sufficient statistics of the model parameters, assuring that
the distribution is completely determined. Many models involve calculation
of thousands of permutations. Exact statistics therefore is not a maximum
likelihood method, which relies on asymptotic standard errors to determine
the significance of predictors. Cytels LogXact software is the foremost statistical package that provides exact statistics for a wide variety of logistic and
Poisson models. If you have access to that package, I recommend it. Stata and
SAS also have exact statistics capabilities, as demonstrated herein.
As an example, I have selected a random subset of the 1991 Arizona
Medicare data for patients hospitalized subsequent to undergoing a CABG
(DRGs 106, 107) or PTCA (DRG 112) cardiovascular procedure.
The data include several possible explanatory predictors, but only two
appear to significantly contribute to understanding and predicting the length
of hospital stay following surgery. The predictor of foremost interest is procedure, which has a value of 1 if the patients had a CABG, and 0 if they had
a PTCA. Procedure is adjusted by type, which is coded as 1 if the patients are
admitted as an emergency or urgent patients and 0 if they are admitted on
an elective basis, which is a nonemergency classification. Patient age ranges
from 65 to 79.
Response: los length (in days) of hospital stay following surgery
Predictors: procedure: 1 = CABG; 0 = PTCA
type: 1 = emergency/urgent admission; 0 = elective admission
219
A tabulation of length of stay (los) for these data is given as

. use azcabgptca
. tab los
LOS |
Freq.
Percent
Cum.
------------+----------------------------------1 |
2 |
3 |
11
23
18
17.46
36.51
28.57
17.46
53.97
82.54
4 |
5 |
6 |
4
4
3
6.35
6.35
4.76
88.89
95.24
100.00
------------+----------------------------------Total |
63
100.00
A cross-tabulation of procedure and type shows that of the 63 records,

no emergency/urgent admissions were given a CABG. The fact that patients
are generally given a CABG when they have a more serious cardiovascular
condition appears to conflict with the data. But since we have data on only
three CABG patients, the data are not likely representative of the underlying
population of cardiovascular procedures. However, they are the only data we
have to work with for this study:
. tab procedure type
1=CABG; |
Severity
0=PTCA | Elective
Emer/Urg |
Total
-----------+----------------------+---------PTCA |
34
26 |
60
CABG |
3
0 |
3
-----------+----------------------+---------Total |
37
26 |
63
Since the goal of our study is to determine comparative length of stay

between the two procedures, we should first tabulate los on procedure to
obtain a descriptive look at the relationship:
. tab los procedure
|
LOS |
1=CABG; 0=PTCA
PTCA
CABG |
Total
-----------+----------------------+---------1 |
11
0 |
11
2 |
23
0 |
23
220
3 |
4 |
5 |
17
4
3
1 |
0 |
1 |
18
4
4
6 |
2
1 |
3
-----------+----------------------+---------Total |
60
3 |
63
There are few observations for CABG patients, but it does appear that
PTCA patients stay in the hospital postsurgery for less time on average than
CABG patients:
. sort procedure
. by procedure: sum los
PTCA
Variable |
Obs
Mean
Std. Dev.
Min
Max
-------------+-------------------------------------------------------los |
60
2.516667
1.214205
CABG
Variable |
Obs
Mean
Std. Dev.
Min
Max
-------------+-------------------------------------------------------los |
3
4.666667
1.527525
3
6
The joint mean is 2.62.

. sum los
Variable |
Obs
Mean
Std. Dev.
Min
Max
-------------+-------------------------------------------------------los |
63
2.619048
1.300478
1
6
Since los is a count, the data are modeled using Poisson regression. The
model is parameterized so that incidence rate ratios are displayed in place of
coefficients:
R
==============================================================
library(COUNT); library(COUNT)
data(azcabgptca); attach(azcabgpca)
table(los); table(procedure, type); table(los, procedure)
summary(los)
summary(c91a - glm(los ~ procedure+ type, family=poisson, data=azcabgptca))
modelfit(c91a)
summary(c91b - glm(los ~ procedure+ type, family=quasipoisson, data=azcabgptca))
221
modelfit(c91b)
library(sandwich); sqrt(diag(vcovHC(c91a, type="HC0")))
==============================================================
. glm los procedure type, fam(poi) eform nolog
No. of obs
63
Optimization
Residual df
60
: ML
Scale parameter =
Deviance
30.23003933
(1/df) Deviance =
.503834
Pearson
29.12460512
(1/df) Pearson
.4854101
Variance function: V(u) = u
[Poisson]
Link function
: g(u) = ln(u)
Log likelihood
= -102.0780388
[Log]
AIC
3.335811
BIC
-218.358
--------------------------------------------------------------------------------|
OIM
los |
IRR
Std. Err.
P|z|
-------------+------------------------------------------------------------------procedure |
2.144144
.6249071
2.62
0.009
1.21108
type |
1.360707
.2215092
1.89
0.058
.989003
3.796078
1.872111
_cons |
2.176471
.2530096
6.69
0.000
1.733016
2.733399
--------------------------------------------------------------------------------. abic
AIC Statistic
3.335811
AIC*n
BIC Statistic
3.345202
BIC(Stata) = 216.58548
= 210.15608
It appears that the data are severely underdispersed, as well as unbalanced.

The response variable does not allow zero counts, and its mean value is
low; however, this typically results in overdispersion, not underdispersion.
The foremost reason for the underdispersion is the fact that some 54% of
counts are either 1 or 2; 85% of the values in the data have counts of 3 or
less. This clumping effect results in underdispersion. If the remaining count
values were skewed farther to the right, the mean would also shift to a higher
value, if only by 1 or perhaps less. But this may help eliminate such overt
underdispersion in the data.
Given the extradispersion in the data, we should either employ scaling to
the standard errors or submit them to adjustment using a robust or sandwich
estimator. Scaling by the Pearson dispersion statistic is the same as using the
quasipoisson family with Rs glm function. Since the heading statistics are
the same as the previous displayed model output, the nohead option is used
to exclude them from being printed:
222
. glm los procedure type ,
fam(poi) eform scale(x2) nolog nohead
----------------------------------------------------------------------------|
OIM
los |
IRR
Std. Err.
P|z|
-----------+----------------------------------------------------------------procedure |
2.144144
.4353814
3.76
0.000
1.440165
3.19224
type |
1.360707
.1543285
2.72
0.007
1.08949
1.699441
_cons |
2.176471
.1762753
9.60
0.000
1.857004
2.550896
----------------------------------------------------------------------------(Standard errors scaled using square root of Pearson X2-based dispersion.)
Adjustment of the standard errors using a robust estimator may be obtained

using the following code:
. glm los procedure type,
fam(poi) eform vce(robust) nolog nohead
The predictor statistics are nearly the same as for the scaled model. This
is a common result. Most statisticians tend to prefer using robust adjustment
rather than scaling, but the results are typically the same.
We should check the zero-truncated Poisson model results since the data
are such that zero counts are excluded and the mean of the response variable is
low. The ZTP model may fit the data better than the traditional Poisson model:
R
===========================================================
library(gamlss.tr)
gen.trun(0,"POI", type="left", name="leftr")
summary(c91c - gamlss(los~ procedure+type, data=az
ptca, family=POleftr))
===========================================================
. ztp los procedure type ,
nolog irr vce(robust)
----------------------------------------------------------------------------|
Robust
los |
IRR
Std. Err.
P|z|
------------+---------------------------------------------------------------procedure |
2.530652
.4607842
5.10
0.000
1.771106
3.615932
type |
1.521065
.2296154
2.78
0.005
1.131496
2.044761
_cons |
1.825901
.1480402
7.43
0.000
1.557628
2.14038
----------------------------------------------------------------------------. abic
AIC Statistic
3.131446
AIC*n
BIC Statistic
3.140837
BIC(Stata) = 203.71049
= 197.28108
223
The fit is indeed superior by 13 points using AIC*n.

Both the traditional and zero-inflated models should be checked for misspecification. The Poisson model produces the following result, indicating
that the model is properly specified or rather, not likely to be misspecified.
The top output tests the Poisson model and the second tests the ZIP.
. linktest /* partial display of output */
-----------------------------------------------------------------------los |
Coef.
Std. Err.
z
P|z|
-------+---------------------------------------------------------------_hatsq |
1.574352
2.691572
0.58
0.559
-3.701031
6.849735
-------+---------------------------------------------------------------_hatsq | -3.11e-07
.9064075
-0.00
1.000
-1.776526
1.776526
------------------------------------------------------------------------
The bottom _hatsq coefficient approximates zero; the p-value is 1. The ZIP
model appears to be misspecified. This likely results from the fact that the
model excludes zero counts yet is rather severely underdispersed.
Using an exact statistics procedure on these data produces the following
coefficients and p-values. Remember that the p-values and confidence intervals are not based on asymptotic statistics. They are of the same nature as the
exact Fisher test when evaluating tables. We see that procedure is significant
at the 95% level but type is not. The standard Poisson model has p-values
of 0.09 and 0.058 for procedure and type, respectively. When scaled and
when a robust sandwich estimator is applied the p-values are 0.008 and
0.005, respectively. We usually think when there is extradispersion in the
data that scaling (quasipoisson) or applying a robust estimator produces
more accurate standard errors, and hence p-values/confidence intervals. But
here it is clear that they do not. The unadjusted Poisson standard errors
and p-values are closer to the exact values than are the scaled and sandwich
results. The difference is important since the exact values inform us that type
is not a significant predictor:
. expoisson los procedure type, irr
Exact Poisson regression
Number of obs =
63
-----------------------------------------------------------------------los |
IRR
Suff. 2*Pr(Suff.)
----------+------------------------------------------------------------procedure |
2.144144
14
0.0224
1.118098
3.828294
type |
1.360707
77
0.0701
.9760406
1.898079
------------------------------------------------------------------------
224
TABLE 9.1. Cytel LogXact Exact Statistics

Confidence Interval and p-Value for Beta
Parameter
Estimates
Point Estimate
95
%CI
2*1-sided
Model Term
Type
Beta
SE(Beta)
Type
Lower
Upper
p-Value
PROCEDURE
TYPE
CMLE
CMLE
0.7627
0.308
0.2914
0.1628
Exact
Exact
0.1116
0.02425
1.342
0.6408
0.02237 ==
0.07008 ==
I have run a LogXact model (see Table 9.1) on the same data. Note that
the conditional maximum likelihood (exact) estimates are the same for both
procedure and type. Exponentiate the LogXact coefficients and confidence
intervals to obtain the same values. For example, exp(.7627) = 2.144 and
exp(.308) = 1.3607.
At the time of this writing, no suitable R code exists for exact Poisson
regression. Exact Poisson regression is recommended for all models that are
unbalanced as well as for data with few observations. Memory is a problem
with larger models, but exact statistics software now provides alternative
models that generally approximate exact values; these include median unbiased estimates (Stata and SAS) and Monte Carlo estimation (LogXact). As
computers become faster, exact methods will likely find more widespread
use.
9.2 MODELING TRUNCATED AND CENSORED COUNTS

There are many times when certain data elements are lost, discarded, ignored,
or otherwise excluded from analysis. Truncated and censored models have
been developed to deal with these types of data. Both models take three forms:
truncation or censoring from below, truncation or censoring from above, and
truncation or censoring at the endpoints of an interval of counts. Count
model forms take their basic logic from truncated and censored continuous
response data, in particular from Tobit (Amemiya 1984) and censored normal
regression (Goldberger 1983), respectively.
Count sample selection models also deal with data situations in which the
distribution is confounded by an external condition. We do not address this
type of model in this book. See Hilbe (2011) for details.
Censored and truncated count models are related, with only a relatively
minor algorithmic difference between the two. The essential difference relates
225
to how response values beyond user-defined cut points are handled. Truncated models eliminate the values altogether; censored models revalue them
to the value of the cut point. In both cases, the probability function and
log-likelihood functions must be adjusted to account for the change in the
distribution of the response. We begin by considering truncation.
9.2.1 Truncated Count Models

In order to understand the logic of truncation, we begin with the basic Poisson
probability mass function, defined earlier as
e i i i
,
yi !
y
Prob (Y = y) =
y = 0, 1, . . .
When we discussed zero-truncated Poisson models in Section 7.1, we adjusted

the preceding Poisson distribution to account for the structural absence
of zeros. We discovered that the probability of a zero count for the Poisson distribution is exp(), for the negative binomial (1)1/2 , and for
the PIG exp((1/)*(1sqrt(1+2/()))). Other zero-truncated models were
addressed, each based on dividing the underlying model PDF by the respective probability of 0. I will focus on using truncated Poisson models, but
understand that the same logic applies to other distributions.
When truncating a zero count from the Poisson distribution, the probability of zero is subtracted from 1, and the result is divided into the full Poisson
PDF; that is, PDF/(1exp()). The same is the case for other distributions,
except that the formula differs.
Going farther from 0, the Poisson probability of 1 is *exp(). If truncation is at 1, then both 0 and 1 must be excluded from the distribution and
an adjustment for both must be made in the resulting adjusted PDF. We do
this by summing the two probabilities and subtracting the sum from 1. This
value is divided into the Poisson PDF:
e i i i
,
(1 (e i + i e i )) yi !
y
Prob (Y = (y = 0, 1)) =
y = 2, 3, . . .
(9.1)
This distribution can be called a left-truncated at 1 Poisson distribution.

When establishing a left truncation at point 1, we place a cut point, C, at
1, and the first number to be in the nontruncated distribution is C + 1.
226
The same logic applies to each greater integer or count from the left. Left
refers to the number line beginning with 0 and moving one integer to the
right with each higher count:
------------------------------------------------- --------------
...
n-1
Example: Left-truncated at 3: model includes counts from 4 to the highest

number in the model.
Right-truncated at 10: model includes counts from 0 to 9.
The left-truncated Poisson PDF in general is Poisson PDF/Prob(y C).
Numerically, this appears as
exp () y
y!
, for y = C + 1, C + 2, . . .
Prob (Y = y|Y C ) =
C exp () j
1
j=0
j!
(9.2)
When a cut point is on the right side, it is the higher-value end of the sorted
distribution:
e i i /yi !
e i i i /yi !
= C 1 i ji
,
i /j !
Prob (yi C )
i
j=0 e
i
y
Prob (Y = y|Y C ) =
for y = 0, 1, . . . , C 1
(9.3)
An example will make it clear how to actually use the model. The same
German health reform data set, rwm1984, is used for our example data.
Employing the user-created Stata treg command (Hardin and Hilbe 2014b),
I first display the results of estimating a left-truncated at 3 Poisson model (see
R code in Table 9.2). With a left cut point at 3, counts in the resultant model
begin at 4, or C + 1 (see distribution in header). Limdep and the gamlss
package in R are the only other software programs I know of that provide the
capability of modeling truncated count data, although they are both limited to
the Poisson and negative binomial distributions. Counts 3 and above are being
modeled. Note that treg allows the user to model left-, right-, and intervaltruncated Poisson, negative binomial, generalized Poisson, PIG, NB-P, and
three-parameter generalized Famoye negative binomial regressions. The latter
four models are new additions with the treg command. The truncated PIG
227
TABLE 9.2. R: Left-Truncated at 3 Poisson

summary(plt - gamlss(docvis~outwork + age,data=rwm1984,family=PO))
library(gamlss); library(gamlss.tr); pltvis-subset(rwm1984, rwm1984$docvis3)
summary(ltpo - gamlss(docvis~outwork+age, family=trun(3, "PO", "left"),
data=pltvis))
----------------pltvis-subset(rwm1984, rwm1984$docvis3)
# alternative method
gen.trun(3, "PO", "left")
# saved globally for session
summary(lt3po - gamlss(docvis~outwork+age, family=POleft, data=pltvis))
is actually the best-fitted model of the alternatives. I suggest using robust

or sandwich standard errors with truncated and censored models. In the
following example, model SEs indicate that outwork is significant when it
is not.
. treg docvis outwork age if docvis3, dist(poisson) ltrunc(3) nolog vce(robust)
Truncated Poisson regression
Number of obs
1022
Distribution = {4, ..., .}
LR chi2(2)
69.68
Log pseudolikelihood =
Prob chi2
0.0000
-4802.67
-----------------------------------------------------------------------------|
docvis |
Robust
Coef.
Std. Err.
P|z|
-------------+---------------------------------------------------------------outwork |
.0735456
.0733219
1.00
0.316
-.0701626
.2172539
age |
.006175
.0029573
2.09
0.037
.0003789
.0119712
_cons |
1.923062
.129157
14.89
0.000
1.669919
2.176205
------------------------------------------------------------------------------
For a truncation from the right side (i.e., at the higher end of the distribution), I display an example of a right-truncated at 10 PIG. With right
truncation at 10, only counts ranging from 0 to 9 are included in the model.
Note the distribution shown in the header information:
. treg docvis outwork age if docvis10, dist(pig)
rtrunc(10)
nolog vce(robust)
Truncated Poisson IG regression
Number of obs
3566
Distribution = {0, ..., 9}
LR chi2(2)
176.44
Prob chi2
0.0000
228
------------------------------------------------------------------------------|
docvis |
Robust
Coef.
Std. Err.
P|z|
-------------+----------------------------------------------------------------outwork |
.415145
.0506344
8.20
0.000
.3159033
age |
.018404
.0022195
8.29
0.000
.0140538
.5143867
.0227542
_cons |
-.3912701
.1007169
-3.88
0.000
-.5886716
-.1938686
-------------+----------------------------------------------------------------/lnalpha |
.5445644
.052255
.4421464
.6469824
-------------+----------------------------------------------------------------alpha |
1.723857
.0900802
1.556044
1.909769
-------------------------------------------------------------------------------
The example in Table 9.3 provides a right truncation at 10 using the

gamlss function: It should also be noted that like using zero-truncation
when the data have no zero counts, if the data have only low value counts,
e.g., 06, a better fitted model may be produced by employing a right truncated model to adjust for not having the higher counts assumed by the
distribution.
TABLE 9.3. R: Right-Truncated Poisson: Cut = 10
rtp-subset(rwm1984, rwm1984$docvis10)
summary(rtpo - gamlss(docvis~outwork + age, data=rtp,
family=trun(9, "PO", type="right")))
Finally, suppose we wish to model visits to the doctor, but only for patients
who have in fact visited a physician during the calendar year 1984. Moreover, for our example, suppose also that visits were not recorded for more
than 18 visits. We then model the data with a left truncation at 0 and right
truncation at 19. This is called interval truncation. This time a truncated NB-P
model is used to model the interval data, parameterized so that estimates are
in terms of incidence rate ratios. This can be achieved with the following
Stata code, but it is not yet possible using R or SAS:
. treg docvis outwork age if docvis0 & docvis19, dist(nbp) ltrunc(0)
rtrunc(19) vce(robust) eform
Truncated neg. bin(P) regression
Number of obs
2172
Distribution = {1, ..., 18}

LR chi2(2)
Prob chi2
=
=
52.70
0.0000
229
-----------------------------------------------------------------------|
Robust
docvis |
exp(b)
Std. Err.
z
P|z|
---------+-------------------------------------------------------------outwork | 1.330828
.0819098
4.64
0.000
1.179593
1.501453
age | 1.010227
.0027296
3.77
0.000
1.004891
1.015591
_cons | 1.840426
.2360925
4.76
0.000
1.431281
2.366528
---------+-------------------------------------------------------------/P | .539376
.2738796
1.97
0.049
.0025817
1.07617
/lnalpha | 1.593174
.3356481
.9353162
2.251033
---------+-------------------------------------------------------------alpha | 4.91934
1.651167
2.548019
9.497538
------------------------------------------------------------------------
The predictors appear to contribute significantly to understanding docvis.

The dispersion parameter is high at 4.92, and the NB-P scale parameter is a
significant 0.539. The variance function is then + 4.92.54 .
9.2.2 Censored Count Models

The censoring that is understood when dealing with count models differs from
the censoring that occurs in survival models. A survival-type parameterization
for censoring was developed by Hilbe (1998) and is discussed in detail in
Hilbe (2011) but will not be addressed here. We will focus on the traditional
parameterization of censoring for count models, which is nearly the same as
truncation. The difference is that instead of truncated values being excluded
from the truncated distribution, censored values are revalued to the value of
the cut point. The distinction is subtle but important:
Left censoring: Left: P(Y C),
If C = 3, 3 is the smallest value in the model. Values that may have been
lower are revalued to C. Any response in the data that is less than 3 is
also considered to be less than or equal to 3.
Right censoring: Right: P(Y C),
If C = 15, 15 is the highest observed value in the model. Values that may
have been greater in the data are revalued to the value at C. Any response
in the data that is greater than 15 is also considered to be greater than or
equal to 15.
The cpoissone (Hilbe 2007a) command is used to model a left-censored
at 3 Poisson model. The software is on the books web site:
. gen cenvar=1
. replace cenvar if docvis=3
230
. cpoissone docvis outwork age, censor(cenvar) cleft(3) nolog

Number of obs
3874
Wald chi2(2)
868.53
Prob chi2
0.0000
------------------------------------------------------------------------docvis |
Coef.
Std. Err.
P|z|
--------+---------------------------------------------------------------outwork |
.2824314
.0176317
16.02
0.000
.247874
.3169888
age |
.0153682
.0007858
19.56
0.000
.0138281
.0169084
_cons |
.6101677
.0367009
16.63
0.000
.5382354
.6821001
------------------------------------------------------------------------AIC Statistic =
5.009
Right censoring is a more common application when using censored Poisson or negative binomial regressions, whereas left truncation is more commonly used with truncation models. cpoissone is used here to model the
right-censored at 10 model:
. replace cenvar=1
. replace cenvar=-1 if docvis=10
. cpoissone docvis outwork age, censor(cenvar) cright(10) nolog
Number of obs
3874
Wald chi2(2)
864.81
Prob chi2
0.0000
-------------------------------------------------------------------------docvis |
Coef.
Std. Err.
P|z|
--------+----------------------------------------------------------------outwork |
.3530813
.0213676
16.52
0.000
.3112017
age |
.0178009
.0009444
18.85
0.000
.0159499
.3949609
.0196519
_cons |
-.045936
.04368
-1.05
0.293
-.1315473
.0396752
------------------------------------------------------------------------AIC Statistic =
5.404
The most common use of a truncation count model is left truncation, in

particular left truncation at 0. Censored models are usually applied to some
right-censored data. Censored models may also be used in hurdle models.
I demonstrated a PIG-Poisson hurdle model earlier in the book, where the
Poisson component was created as a right-censored at 1 model. It is possible
to have a right-censored at 2 Poisson or negative binomial and a logit binary
where counts begin at greater than 2. That is, we created a visit variable at
gen visit = docvis 0 where counts 1 and greater are included. We could,
however, have set docvis 1 so that the binary component would include
231
TABLE 9.4. R: Left-Censored Poisson at Cut = 3

library(gamlss.cens); library(survival); library(COUNT)
lcvis - rwm1984
cy - with(lcvis, ifelse(docvist3, 3, docvis))
ci - with(lcvis, ifelse(docvis=3, 0, 1))
Surv(cy,ci, type="left")[1:100]
cbind(Surv(cy,ci, type="left")[1:50], rwm1984$docvis[1:50])
lcmdvis - data.frame(lcvis, cy, ci )
rm(cy,ci); gen.cens("PO",type="left")
lcat30-gamlss(Surv(cy, ci, type="left") ~ outwork + age,
data=lcvis, family=POlc)
summary(lcat30)
0 and 1 combined, for a right-censored at 2 count model. This would give us

a hurdle model with an extended binary component. This discussion brings
us to finite mixture models.
9.2.3 Poisson-Logit Hurdle at 3 Model

An extended type of hurdle model that branches over to finite mixture models,
which we discuss next, can be created by setting the hurdle at a higher place
in the range of counts than at 0. Here I show an example of a Poisson-logit
hurdle that is set at a count of 3. To execute this, I create a right-censored at 3
Poisson model and a logit model that has a response with 1s for counts 3 and
above and 0s for counts 0, 1, and 2. See the tabulation of docvis and a variable
called cenvar that follows. The binary and count components constitute the
Poisson-logit hurdle model with the hurdle point at 3, not at 0 as usual. This
logic can be applied to the other distributions as well to give a wide range of
distributions and cut points reflecting the data being modeled.
TABLE 9.5. R: Right-Censored Poisson at 10
library(gamlss.cens); library(survival); rcvis - rwm1984
cy - with(rcvis, ifelse(docvis=10, 9, docvis))
ci - with(rcvis, ifelse(docvis=10, 0, 1))
rcvis - data.frame(rcvis, cy, ci )
rm(cy,ci) ; gen.cens("PO",type="right")
summary(rcat30-gamlss(Surv(cy, ci) ~ outwork + age,
data=rcmdvis, family=POrc, n.cyc=100))
232
POISSON COUNT COMPONENT

. gen cenvar=1
. replace cenvar=-1 if docvis=3
. epoissone docvis outwork, nolog cright(3)
. cpoissone docvis outwork age, censor(cenvar) cright(3) nolog
Number of obs
3874
Wald chi2(2)
393.14
Prob chi2
0.0000
-------------------------------------------------------------------------docvis |
Coef.
Std. Err.
P|z|
---------+---------------------------------------------------------------outwork |
.3250068
.0287805
11.29
0.000
.2685981
age |
.0164991
.0012707
12.98
0.000
.0140087
.3814156
.0189896
_cons |
-.4033441
.0580651
-6.95
0.000
-.5171495
-.2895387
-------------------------------------------------------------------------AIC Statistic =
2.886
LOGIT BINARY COMPONENT

. gen visit = docvis=3
. tab visit
visit |
Freq.
Percent
Cum.
---------+-------------------------------------0 |
2,499
64.51
64.51
1 |
1,375
35.49
100.00
---------+-------------------------------------Total |
3,874
100.00
. glm visit outwork age, fam(bin) nolog nohead

-------------------------------------------------------------------------|
visit |
OIM
Coef.
Std. Err.
P|z|
---------+---------------------------------------------------------------outwork |
.5701073
.0717644
7.94
0.000
.4294516
.710763
age |
.0287807
.0031698
9.08
0.000
.022568
.0349933
_cons |
-2.10176
.1438936
-14.61
0.000
-2.383786
-1.819733
--------------------------------------------------------------------------
9.3 COUNTS WITH MULTIPLE COMPONENTS FINITE

MIXTURE MODELS
What do we do if we suspect that the response variable of our model consists of
counts that have been generated from different data-generating mechanisms?
That is, there are times when the data to be modeled are generated from more
than one source. Finite mixture models have been developed to model this
sort of data situation (see Table 9.6).
233
9.3 Counts with Multiple Components Finite Mixture Models
TABLE 9.6. R: PoissonPoisson Finite Mixture Model

library(COUNT)
library(flexmix)
data(fishing)
attach(fishing)
fmm_pg - flexmix(totabund~meandepth + offset(log(sweptarea)),
data=rwm1984, k=2,
model=list(FLXMRglm(totabund~., family="NB1"),
FLXMRglm(tpdocvis~., family="NB1")))
parameters(fmm_pg, component=1, model=1)
parameters(fmm_pg, component=2, model=1)
summary(fmm_pg)
As an example, well start with an NB2-NB2 mixture. This means that both
components in the data are distributed as NB2, but with differing parameters.
We will use the fishing (adapted from Zuur, Hilbe, and Ieno 2013) data
to determine whether the data appear to be generated from more than one
generating mechanism. The data are adapted from Bailey et al. (2008), who
were interested in how certain deep-sea fish populations were impacted when
commercial fishing began in locations with deeper water than in previous
years. Given that there are 147 sites that were researched, the model is (1) of
the total number of fish counted per site (totabund); (2) on the mean water
depth per site (meandepth); (3) adjusted by the area of the site (sweptarea);
and (4) the log of which is the model offset.
. use fishing
. fmm totabund meandepth, exposure(sweptarea) components(2) mixtureof(negbin2)
2 component Negative Binomial-2 regression
Number of obs
147
Wald chi2(2)
167.04
Prob chi2
0.0000
-----------------------------------------------------------------------------totabund |
Coef.
Std. Err.
P|z|
-------------+---------------------------------------------------------------component1
meandepth |
-.0008543
.0001498
-5.70
0.000
-.0011479
-.0005606
_cons |
-4.144922
.5319592
-7.79
0.000
-5.187543
-3.102301
ln(swepta~a) |
(exposure)
-------------+---------------------------------------------------------------component2
meandepth |
-.0011734
.0000919
-12.77
0.000
-.0013535
-.0009932
234
_cons |
-2.816184
ln(swepta~a) |
.3340012
-8.43
0.000
-3.470815
-2.161554
(exposure)
-------------+---------------------------------------------------------------/imlogitpi1 |
.06434
1.077807
0.06
0.952
-2.048124
2.176804
/lnalpha1 |
-.4401984
.2589449
-1.70
0.089
-.9477211
.0673244
/lnalpha2 |
-1.488282
.4407883
-3.38
0.001
-2.352212
-.624353
-----------------------------------------------------------------------------alpha1 |
.6439087
.1667369
.3876234
1.069642
alpha2 |
.2257601
.0995124
.0951585
.5356078
pi1 |
.5160794
.2691732
.1142421
.898147
pi2 |
.4839206
.2691732
.101853
.8857579
------------------------------------------------------------------------------
The probability of a site being in the first component of the distribution

is .516, whereas the probability of being in the second component is .484.
The confidence intervals do not include 0, so we may consider that both
significantly represent the underlying distributional probabilities. It is clear
that there is more variability in the first component:
. predict mean1, equation(component1)
. predict mean2, equation(component2)
. sum mean*
Variable |
Obs
Mean
Std. Dev.
Min
Max
-------------+-------------------------------------------------------meandepth |
147
2413.088
1254.587
804
4865
mean1 |
mean2 |
147
147
150.9075
335.3274
94.06647
269.7885
19.26319
15.90274
415.0464
1128.203
The second component has a mean value of fish per site that is some twoand-a-quarter times (335/151) greater than the first component, even though
it is only 48% of the overall population. The overall mean fish per site can be
calculated as
. di .5160794 * 150.9075 + .4839206 * 335.3274
240.15209
If the data are partitioned into three components, the probability values
for being in each component are
pi1 |
pi2 |
.2230491
.7169981
.2346794
.2227915
.0197984
.2275204
.8031637
.9561276
pi3 |
.0599529
.0351927
-.0090236
.1289294
235
9.4 Adding Smoothing Terms to a Model GAM
This time, the second component has 72% of the data, the first has 22%,
and the third 6%. The third component, however, is not significant (confidence interval includes 0). Greater partitions also fail to show more than
two significant components. Interestingly, the model used is pooled over precommercial fishing (19771989) and commercial fishing (20002002) years,
although there is some overlap in period and meandepth:
. tab period
0=1977-89;1 |
=2000+ |
Freq.
Percent
Cum.
------------+----------------------------------1977-1989 |
97
65.99
65.99
2000-2002 |
50
34.01
100.00
------------+----------------------------------Total |
147
100.00
Modeling the data using negative binomial regression but including the
binary predictor, period, produces a well-fitted model. Using robust estimators
yields standard errors that are nearly identical to the following standard
model:
. nbreg totabund meandepth period, exposure(sweptarea) nolog
------------------------------------------------------------------------------totabund |
Coef.
Std. Err.
P|z|
--------------+---------------------------------------------------------------meandepth | -.0010168
.0000505
-20.14
0.000
-.0011158
-.0009179
period | -.4269806
.1260863
-3.39
0.001
-.6741052
-.1798559
.1395975
-23.69
0.000
-3.580609
-3.033397
_cons | -3.307003
ln(swepta~a) |
(exposure)
--------------+---------------------------------------------------------------/lnalpha |
-.6697869
.1118123
-.8889351
-.4506388
--------------+---------------------------------------------------------------alpha |
.5118176
.0572275
.4110933
.637221
------------------------------------------------------------------------------Likelihood-ratio test of alpha=0:
chibar2(01) = 1.4e+04 Prob=chibar2 = 0.000
Finite mixture models may have multiple components and be structured such
that the response is comprised of more than one distribution.
9.4 ADDING SMOOTHING TERMS TO A MODEL GAM

Generalized additive models (GAMs) are a class of models based on generalized linear models for which the linear form of the model, x, is replaced
236
TABLE 9.7. R: GAM

library(COUNT); library(mgcv)
summary(pglm - glm(docvis ~ outwork + age + female + married +
edlevel2 + edlevel3 + edlevel4, family=poisson, data=rwm1984))
summary(pgam - gam(docvis ~ outwork + s(age) + female + married +
edlevel2 + edlevel3 + edlevel4, family=poisson, data=rwm1984))
plot(pgam)
by a sum of smoothed functions, s(X). The method is used to discover nonlinear covariate effects that may not be detectable using traditional statistical
techniques.
GAM methodology was originally developed by Stone (1985) but was later
popularized by Hastie and Tibshirani (1986, 1990). The authors even developed a software package called GAIM, for generalized additive interactive
modeling, which stimulated its inclusion in several of the major commercial
packages.
The key concept in GAM modeling is that the partial residuals of continuous predictors in a model are smoothed using a cubic spline, loess smoother,
or another type of smoother while being adjusted by the other predictors
in the model. The parameters of the smooths are related to the bandwidth
that was used for the particular smooth. The relationship that is traditionally
given for the GAM distribution is
y = 0 +
j

fj Xj +
(9.4)
i=1
It is important to remember that the purpose of using GAM is to determine

the appropriate transformation needed by a continuous predictor in order to
affect linearity. A GAM employs the iteratively reweighted least squares (IRLS)
algorithm used in GLM models for estimation. At each iteration, the partial
residuals of each relevant continuous predictor in the model are smoothed.
Partial residuals are used since they remove the effect of the other model
predictors.
I will use as an example the rwm1984 data, showing the parameter estimates of a GLM and GAM on the full model data. age is the only continuous
predictor, so the smooth is of it. (See Table 9.7.)
237
9.4 Adding Smoothing Terms to a Model GAM
summary(pgam)
Parametric coefficients:
(Intercept)
outwork
Estimate
0.97150
0.29554
Std. Error
0.02398
0.02216
z value
40.512
13.338
Pr(|z|)
2e-16 ***
2e-16 ***
female
married
edlevel2
0.25287
-0.12594
-0.06771
0.02137
0.02246
0.04232
11.831
-5.607
-1.600
2e-16 ***
2.06e-08 ***
0.11
edlevel3
edlevel4
---
-0.19530
-0.24543
0.03997
0.04813
-4.886
-5.099
1.03e-06 ***
3.41e-07 ***
Approximate significance of smooth terms:

edf Ref.df Chi.sq p-value
s(age) 7.189
8.215
869.8
2e-16 ***
--R-sq.(adj) =
0.0388
UBRE score = 5.1353
Deviance explained = 7.95%

Scale est. = 1
n = 3874
plot(pgam)
0.0
-0.2
-0.4
s(age,7.19)
0.2
0.4
Figure 9.1 demonstrates the extreme nonlinearity at the extremes of the

distribution of age, which is smoothed using a cubic spline with a parameter
value of 7.19. There are fewer values at the upper ages of 5664. Recall that
ages run from 25 to 64. Linearity appears to exist from about 30 to 55. Note
that a smooth value of over 7 is considered quite high. Stata does not currently
support GAM modeling, but SAS does.
30
40
50
60
age
FIGURE 9.1. Nonlinearity of age distribution.
238
9.5 WHEN ALL ELSE FAILS: QUANTILE COUNT MODELS

When we simply cannot obtain a reasonably fitted Poisson, negative binomial, PIG, or some variation of these models based on a PDF or likelihood
function, we may try to model the empirical distribution of counts without
assuming an underlying probability or likelihood function. That is, we discover a shape to the distribution as we find it and model it using quantile
techniques.
There are several versions of quantile count models. The variety discussed
here relates to the work of Machado and Santos Silva (2005). The idea is to
model the discrete data with a jitter in such a manner that the distribution
appears as a continuous variable. The response is structured as
z = y + uniform(0, 1)
(9.5)
z is linearized at the conditional mean of each quantile of the distribution as

exp(x), which keeps the distribution positive. Expanded details are available
in Hilbe (2011).
The traditional quantile regression is based on the median, or other quantiles, of a Gaussian distribution. I set estimation using a median of 0.5:
. use rwm1984
. qcount docvis outwork age, q(.5) rep(1000)
Count Data Quantile Regression
( Quantile 0.50 )
Number of obs
3874
No. jittered samples

=
1000
-----------------------------------------------------------------------docvis |
Coef.
Std. Err.
z
P|z|
--------+--------------------------------------------------------------outwork | .7498776
.1166354
6.43
0.000
.5212764
.9784788
age | .0390985
.004477
8.73
0.000
.0303238
.0478731
_cons | -1.956534
.1920532
-10.19
0.000
-2.332951
-1.580117
------------------------------------------------------------------------
If the coefficients and standard errors are the same when modeling with
fewer iterations (e.g., 100), then an analyst can be more confident that the
model is working correctly.
Marginal effects may be calculated using the command qcount_mfx. The
model should be compared with a negative binomial model on the same data.
9.6 A Word about Longitudinal and Clustered Count Models
239
Most models give results similar to those of negative binomial and PIG. R
does not support the quantile count model at this time.
9.6 A WORD ABOUT LONGITUDINAL AND CLUSTERED

COUNT MODELS
Count models are standard components of the major longitudinal models,
as well as multilevel models. There are two broad types of models that are
commonly used for longitudinal and multilevel modeling. The first is generalized estimating equations (GEEs), which is a population-averaging method
of estimation. GEE models are not true likelihood-based models but rather
are examples of quasi-likelihood models. The other type of model is referred
to as a subject-specific model. Most random- and mixed-effects models are in
this class of models.
9.6.1 Generalized Estimating Equations (GEEs)

GEE models are an extension of the generalized linear model (GLM) where
the variance function is adjusted using a correlation matrix. Several standard
correlation structures are used for GEE analysis:
r independence an identity matrix, no correlation effect is specified at all;
r exchangeable a common correlation value provided to each panel or
cluster in the data;
r autoregressive lag correlation for longitudinal and other time-dependent
variables;
r unstructured separate correlation values for each panel or cluster in the
data.
Other structures also exist (stationary, nonstationary, Markov, family) but are
rarely used in research. Statas xtgee command is a full GEE package. R has
several GEE functions: geepack, glmgee, and yags. The first two are used
most often for GEE modeling among R users. The Genmod procedure in SAS
is a GLM procedure but has an option for modeling GEEs. I can recommend
Hardin and Hilbe (2013b), the standard text on the subject. It has both
Stata and R examples throughout the book, as well as supplementary SAS
code.
240
TABLE 9.8. R: GEE

library(COUNT); library(gee); data(medpar)
summary(pgee - gee(los ~ hmo + white + age80 + type2 + type3,
data=medpar,
id=medpar$provnum,
corstr=exchangeable, family=poisson))
To give a brief example, well use the U.S. Medicare data called medpar.
Length of stay is the response, with hmo, white, age80, and types of admission
as predictors. Stata requires that the cluster variable be numeric. The encode
command converts a string to numeric. An exchangeable correlation structure
was selected since we do not know anything about the data other than that
they are overdispersed and come in panels (i.e., patients within hospitals).
The idea is that patients are likely to be treated more alike within hospitals
than between hospitals, adding overdispersion to the data. A Poisson GEE
model is used for the example. (See Table 9.8.)
. use medpar
. encode provnum, gen(hospital)
. xtgee los hmo white age80 type2 type3, i(hospital) c(exch) vce(robust)
fam(poi) eform
GEE population-averaged model
Number of obs
1495
Group variable: hospital
Number of groups
54
Link: log
Obs per group: min =
Family: Poisson
avg
27.7
Correlation: exchangeable
max
92
Wald chi2(5)
27.51
Prob chi2
0.0000
Scale parameter: 1
(Std. Err. adjusted for clustering on hospital)

----------------------------------------------------------------------------|
los |
Robust
Coef.
Std. Err.
P|z|
---------+------------------------------------------------------------------hmo |
-.0876095
.0584452
-1.50
0.134
-.20216
.026941
white |
-.1078697
.0732792
-1.47
0.141
-.2514942
.0357549
age80 |
-.0583864
.0611035
-0.96
0.339
-.1781471
.0613743
type2 |
.2295517
.0602295
3.81
0.000
.111504
.3475993
type3 |
.5402621
.1974048
2.74
0.006
.1533559
.9271684
_cons |
2.310611
.074003
31.22
0.000
2.165568
2.455654
-----------------------------------------------------------------------------
241
Coefficients:
Estimate Naive S.E.
(Intercept)
Naive z Robust S.E.
Robust z
2.31069563 0.07615419 30.342331
0.07328592 31.5298719
hmo
-0.08757282 0.06332121 -1.382993
0.05788583 -1.5128541
white
-0.10802330 0.07240366 -1.491959
0.07260164 -1.4878908
age80
-0.05837643 0.05177317 -1.127542
0.06053692 -0.9643112
type2
0.22951223 0.05663849
4.052231
0.05967494
3.8460402
type3
0.54096501 0.08222260
6.579274
0.19567264
2.7646431
Estimated Scale Parameter:
6.504578
The incidence rate ratios are:

exp(pgee$coefficient)
(Intercept)
hmo
white
age80
type2
type3
10.0814351
0.9161522
0.8976067
0.9432948
1.2579863
1.7176636
9.6.2 Mixed-Effects and Multilevel Models

Mixed-effects models are panel models that are combinations of fixed and
random effects, both of which have models named for them. Fixed effects
are generally regarded as emphasizing the measurements of the effects themselves. That is, what is being measured is important in itself; it is fixed.
Standard regression coefficients are fixed effects in that sense. This is distinct
from random effects, which assume the measurements are samples or representatives of a greater population. Random effects are generally structured so
that they are normally distributed with a mean of 0 and standard deviation
of 2 or N(0, 2 ). The random effects themselves are not generally estimated
directly but are summarized based on their underlying variancecovariance
matrices.
Random-effects models are often divided into two categories random
intercept, and random slopes or coefficients. A random-intercept model
is the simplest random-effects model, being structured so that only the
intercepts are random. They vary in value across panel intercepts. If the
coefficients themselves vary between panels, the model is a random-slopes
model.
There are in fact a host of different classifications of fixed- and randomeffects models, but these can generally be placed into one of the preceding
general categories. We do not have space here to delve into all the varieties
242
TABLE 9.9. R: Random Intercept Poisson

library(gamlss.mx)
summary(rip - gamlssNP(los ~ hmo + white + type2 + type3,
random=~1|provnum, data=medpar,
family=PO, mixture="gq", K=20))
of the models, but we will look at setting up a simple random-intercept

Poisson model using the same data we used for the GEE models:
. xtmepoisson los hmo white type2 type3 provnum:
Mixed-effects Poisson regression
Number of obs
1495
Group variable: provnum
Number of groups
54
Integration points =
Obs per group: min =
avg =
27.7
max =
92
Wald chi2(4)
109.81
Prob chi2
0.0000
------------------------------------------------------------------------------los |
Coef.
Std. Err.
P|z|
-------------+----------------------------------------------------------------hmo |
-.0907326
.0259212
-3.50
0.000
-.1415373
white |
-.0275537
.0302745
-0.91
0.363
-.0868906
-.0399279
.0317832
type2 |
.2319144
.0247704
9.36
0.000
.1833654
.2804634
type3 |
.1226025
.0488912
2.51
0.012
.0267775
.2184275
_cons |
2.191951
.0649116
33.77
0.000
2.064726
2.319175
------------------------------------------------------------------------------------------------------------------------------------------------------------Random-effects Parameters
Estimate
Std. Err.
------------------------------+-----------------------------------------------provnum: Identity
|
sd(_cons) |
.4116571
.0457474
.3310866
.5118346
------------------------------------------------------------------------------LR test vs. Poisson regression:
chibar2(01) =
800.46 Prob=chibar2 = 0.0000
The actual random-intercept values can be obtained using the following

code:
. predict raneff, ref
. sum raneff
Variable |
Obs
Mean
Std. Dev.
Min
Max
-------------+-------------------------------------------------------raneff |
1495
.0383374
.2614734 -.7469211
1.37513
243
The R code for the same model is given in Table 9.9:

Mu Coefficients:
(Intercept)
hmo
Estimate
2.11707
-0.07501
Std. Error
0.02839
0.02398
t value
74.563
-3.128
Pr(|t|)
0.000e+00
1.763e-03
white
type2
-0.03080
0.21709
0.02774
0.02113
-1.110
10.275
2.670e-01
9.996e-25
type3
0.26166
0.03098
8.447
3.115e-17
z
0.50154
0.01642
30.549 7.335e-202
------------------------------------------------------------------No. of observations in the fit:
Degrees of Freedom for the fit:
Residual Deg. of Freedom:
Global Deviance:
AIC:
SBC:
29900
6
1489
13086.16
13098.16
13130.02
There is a slight difference in estimates between the Stata and R models

based on how the models were estimated. Stata is using quadrature, whereas
Rs gamlss is using the EM algorithm. R users often use the lme4 package
for estimation of longitudinal and mixed models. The package includes the
longitudinal form of equation (4.16) that was discussed in Section 4.3.1,
using the aictab function.
Multilevel models are based on the same logic, with levels of nested models
being estimated.
You are referred to the following texts for added explanation and examples:
Zuur, Hilbe, and Ieno (2013), Hilbe (2011), and Faraway (2006).
A multilevel model is just what you would imagine. Levels are an intrinsic
aspect of many data situations. Using the full five-year German health data,
we can nest individual patient records within the years from 1984 through
1988. Patients have records from one to all five years. The model used is a
three-level random-intercept GLM-Poisson model, which is new to Stata 13
(June 2013):
. tab year
year:1984- |
1988 |
Freq.
Percent
Cum.
------------+----------------------------------1984 |
3,874
19.76
19.76
1985 |
3,794
19.35
39.10
244
1986 |
1987 |
1988 |
3,792
3,666
4,483
19.34
18.70
22.86
58.44
77.14
100.00
------------+----------------------------------Total |
19,609
100.00
. meglm docvis outwork age female married
Mixed-effects GLM
Number of obs
Family: Poisson
id: year:, fam(poi)

=
19609
Link:
log
----------------------------------------------------------|
No. of
Observations per Group
Group Variable |
Groups
Minimum
Average
Maximum
----------------+-----------------------------------------id |
6127
1
3.2
5
year |
19609
1
1.0
1
----------------------------------------------------------Integration method: mvaghermite
Integration points =
Wald chi2(4)
Prob chi2
= 585.20
= 0.0000
----------------------------------------------------------------------docvis |
Coef.
Std. Err.
z
P|z|
----------+-----------------------------------------------------------outwork |
age |
female |
.1522959
.025162
.4215679
.0318875
.0014824
.03611
4.78
16.97
11.67
0.000
0.000
0.000
.0897975
.0222565
.3507936
.2147943
.0280674
.4923422
married |
-.048628
.0367921 -1.32
0.186 -.1207391
.0234831
_cons | -1.108713
.0705329 -15.72
0.000 -1.246955
-.9704716
----------+-----------------------------------------------------------id
|
var(_cons)|
1.11585
.035832
1.047785
1.188337
----------+-----------------------------------------------------------idyear
|
var(_cons)|
.8704313
.0202643
.8316065
.9110686
----------------------------------------------------------------------LR test vs. Poisson regression: chi2(2) = 70423.53
Probchi2 = 0.0000
Note: LR test is conservative and provided only for reference.
Id var(_cons) indicates the subject-specific random effects. It is significant

with a standard error of .036. There also appears to be more unobserved
variability between years than between individuals within each year. The
likelihood ratio test informs us that the multilevel model is better fitted than
a pooled Poisson model.
245
9.7 THREE-PARAMETER COUNT MODELS

We have previously examined a three-parameter count model, NB-P, where
the power of the second term of the negative binomial variance function is
parameterized: + . When (rho) equals 1, the model is NB1. When
= 2, the model is NB2, or the traditional version of the negative binomial
model. NB-P can be used to select later modeling by NB1 or NB2 regression,
or used in its own right as a more malleable means of adjusting for extra
correlation in the data. I prefer to use it in the latter manner. However, there
is a real sense in which the NB-P is not a true generalized negative binomial
model.
A generalized model is typically one that adds another parameter to adjust
for correlation or variability in a lower-level model. The negative binomial model is a generalization of the Poisson as a Poisson-gamma mixture.
The generalized Poisson model is a type of Poissonlog-normal mixture,
and we have discussed the Poissoninverse Gaussian mixture model (PIG).
Each of these models provides a dispersion parameter to adjust for Poisson
overdispersion. The generalized Poisson model can also adjust for underdispersion.
The dispersion parameter for each of these models is singular across counts
and observations. But what if the data are such that the dispersion or correlation varies in different parts of the distribution? Another parameter can
be provided to adjust for this situation. There are a class of three-parameter
models that have been developed to deal with variation in the dispersion
statistic by adding a second scale parameter to the distribution. The foremost
of these, with developers of note and pertinent references, are
r generalized Waring negative binomial regression (GWRM) (Xekalaki
1983, Rodrguez-Avi et al. 2009)
r generalized Famoye negative binomial regression (NBF) (Famoye 1993)

r extended Poisson process models (EPPMs) (Faddy and Smith 2012)
r Conway-Maxwell Poisson regression (COM) (Conway and Maxwell 1962;
Sellers and Shmueli 2010)
r NB-L (Lord, Guikema, and Geedipally 2007)

r Double Poisson (Efron 1986; Miranda 2013; Geedipally, Lord, and Dhavala
2013)
For those who are interested in following up on this class of models, the
Bibliography has articles by the researchers listed. R software is available
for the listed models as well, and Stata commands exist for the top two
246
(Harris, Hilbe, and Hardin 2013). However, to give a sense of how these
types of models work, Ill outline the generalized Waring model. The model
is essentially akin to generalized Poisson regression, but with an additional
parameter.
The model is named after Edward Waring (17361798), who first proposed
a distribution from which the currently parameterized distribution is derived.
The distribution was advanced by Newbold (1927), and Irwin (1968) and
Xekalaki (1983), who developed its present form. The PDF is defined by
Rodrguez-Avi et al. (2009) as
( + ) (1)
(1 + )(+ ) with , 0
() ( )
(9.6)
The three parameters are , , and , which reflect the variability in the
data. The PDF posits that the variability in the data can be partitioned into
three additive components:
r randomness,
r proneness internal differences between individuals,
r liability the presence of outside sources of variability not included directly
in the model.
Xekalaki (1983) developed the three components of variability for this distribution and was instrumental, along with Rodrguez-Avi et al. (2009), in
developing an R package for estimation of a model based on the generalized
Waring distribution. The model statistics (mean, variance, etc.) and examples
of the use of this model can be found in Hilbe (2011). The Stata command that
follows is from Harris, Hilbe, and Hardin (2013). The PDF appears different
from equation (9.6) but is in fact the same. The zero-inflated version of the
model is used here since the data being modeled are substantially overdispersed because of excessive zero counts. The response term, docvis, has far
more zeros than expected due to its mean value of 3.1:
. global xvar "outwork age female married"
. zinbregw docvis $xvar, vce(robust) nolog inflate($xvar)
Zero-inflated gen neg binomial-W regression
Number of obs
Regression link:
Nonzero obs
2263
Inflation link : logit
Zero obs
1611
Wald chi2(4)
87.78
Prob chi2
0.0000
3874
247
---------------------------------------------------------------------------|
docvis |
Robust
Coef.
Std. Err.
P|z|
----------+----------------------------------------------------------------docvis
outwork |
.2033453
.0696412
2.92
0.004
.0668511
age |
.0144888
.0025891
5.60
0.000
.0094143
.3398396
.0195633
female |
.1779968
.0632358
2.81
0.005
.0540569
.3019366
married |
-.08596
.0719044
-1.20
0.232
-.2268901
.0549701
_cons |
.6758925
.1368147
4.94
0.000
.4077405
.9440444
----------+----------------------------------------------------------------inflate
outwork |
-.1881244
.1430329
-1.32
0.188
-.4684638
.092215
age |
-.0253405
.0052679
-4.81
0.000
-.0356654
-.0150156
-.3412052
female |
-.5850628
.1244194
-4.70
0.000
-.8289203
married |
.0060488
.1471382
0.04
0.967
-.2823369
.2944345
_cons |
.4636771
.2425741
1.91
0.056
-.0117594
.9391136
----------+----------------------------------------------------------------/lnrhom2 |
.1981729
.0867388
.028168
.3681778
/lnk |
1.068476
.0799546
.911768
1.225184
----------+----------------------------------------------------------------rho |
3.219173
.1057496
3.028568
3.445099
k |
2.91094
.2327431
2.488719
3.404794
---------------------------------------------------------------------------Vuong test of zinbregw vs. gen neg binomial(W):
z =
0.92
Prz = 0.1777
k is the proneness parameter. For this model, it is a measure of a patients

likelihood of visiting a doctor again after earlier visits. k is defined as
/( 1). A k of 2.9 indicates that the model explains more variation than
an NB2 negative binomial model on the same data. Rho ( ) is the liability parameter, indicating unaccounted-for variation. There is considerable
outside variation in the data.
The Vuong test advises the user as to the relationship of the zero-inflated
model to a standard Waring model. If the p-value is significant and z positive,
a zero-inflated model is preferred. A significant p-value with a negative zstatistic prefers the nonzero-inflated model. A nonsignificant p-value indicates
no preference for either model. This is the case here.
For an R implementation, the GWRM package for the Waring regression
model can be downloaded from CRAN. The same data as used for the Stata
example are used here as well. Note that the R function does not allow for
zero-inflated modeling. The results will differ a bit between the two models,
248
TABLE 9.10. R: Generalized Waring Regression

library(COUNT); library(GWRM)
war - GWRM.fit(docvis ~ outwork + age + female + married, data=rwm1984)
GWRM.display(war)
and more so for the variance parameters. (R code for the generalized Waring
regression is given in Table 9.10.)
GWRM.display(war)
$Table
covars
estimates
se
z
p
1 (Intercept) -0.24507662 0.121905501 -2.010382 4.439078e-02
2
outwork 0.26839550 0.064308985 4.173530 2.999156e-05
3
4
5
age 0.02500018 0.002508417 9.966516 2.135897e-23

female 0.41875059 0.061392023 6.820928 9.045406e-12
married -0.10661269 0.068266458 -1.561714 1.183554e-01
$betaII
par
coef
value
1
k -0.5201369 0.5944391
2
ro
1.0447706 3.8427462
$Fit
1
log-likelihood
AIC
BIC
df
-8273.765 16561.53 16605.36 3867
The value of k, the proneness parameter, is .59, also indicating that it

adjusted for variation in the data better than the negative binomial model.
See Hilbe (2011) and Harris, Hilbe, and Hardin (2014) for a more extensive
discussion. The generalized Famoye negative binomial model, Famoye and
Smiths EPPM, and other models are discussed in the e-book Extensions to
Modeling Count Data. Stata software for Famoye, zero-inflated Famoye, and
truncated Famoye are available on the books web site, with directions on
their use. The same Waring models are available as well.
9.8 BAYESIAN COUNT MODELS FUTURE DIRECTIONS

MODELING?
OF
Bayesian estimation has become popular only in the last two decades. Actually, though, it is likely more accurate to state that it has become popular
249
since the mid-2000s. There were certainly Bayesians before this, but the vast
majority of statisticians adhered to what is called the frequentist interpretation of statistics. The statistical models we have thus far discussed in this
book are based on a frequentist interpretation. Frequentists assume that there
are fixed but unknown true parameters of a probability distribution that best
describe the data we are modeling. The model data are regarded as a random sample of data from a greater population of data, which is distributed
according to the parameters of a specific probability distribution. Again, the
model parameters are fixed; the analysts goal is to model the data so that we
derive an estimate as close as possible to the true parameter values. Maximum likelihood estimation is the method used most often for estimating the
parameters.
Bayesians, on the other hand, argue that parameters are themselves random
variables, and each has its own distribution in a model. Each predictor coefficient is a random variable and can be entirely different from other coefficients
in the model. We may initially assume that a binary variable is best described
by a Bernoulli or a more general binomial distribution, a count described by
a Poisson or negative binomial distribution, a continuous variable described
by a normal or Gaussian distribution, or a positive-only continuous variable
described by a gamma distribution. For a binary variable, for instance, we
assume that it is best described by a Bernoulli distribution, which we call a
posterior distribution. It is mathematically represented as a likelihood not
a log-likelihood.
A key feature of Bayesian statistics is that we may have information about
the data that might bear on the parameter values. This is called prior information, and it is described mathematically as a distribution a prior distribution. The posterior distribution for each predictor is updated by the respective prior distribution at each iteration in the overall estimation process.
The likelihood is multiplied by the prior, resulting in an updated posterior
distribution:
p(|y) L() ()
(9.7)
p(|y) is the posterior distribution that we believe describes the predictors,

L() is the likelihood of the distribution that makes the data most likely,
and () is the prior distribution, which describes the prior information we
believe bears on the final posterior distribution of the predictor.
The posterior distribution may be simple, if no priors are involved, or
quite complex, when there is no analytic solution or when an analytic solution is extremely difficult to calculate. Since most real data entail complex
250
TABLE 9.11. R: Bayesian Poisson MCMC

library(COUNT); library(MCMCpack); data(medpar)
summary(poi - glm(los ~ hmo + white + type2 + type3,
family=poisson, data=medpar))
confint.default(poi)
summary(poibayes - MCMCpoisson(los ~ hmo + white + type2 + type3,
burnin = 5000, mcmc = 100000, data=medpar))
distributions, Bayesian statisticians turned to simulation as a method

of estimation and now base nearly all estimation algorithms on some
variety of MCMC simulation algorithm. MCMC is an acronym meaning
Markov Chain Monte Carlo, which is a method of repeatedly sampling
from the posterior until the updates do not change until they are stable.
This may take 100,000 to 1 million or more iterations.
The estimated parameter coefficient is taken as the mean (or sometimes
median) of the posterior distribution. The standard error of the mean is the
coefficient standard error, and the 95% quantiles are the credible intervals,
in contrast with the frequentist confidence intervals.
There is a substantial theory underlying Bayesian modeling. Interestingly,
when uniform priors, also called noninformative or vague priors, are given
in a Bayesian model, the parameter estimates are often nearly identical to
frequency-based maximum likelihood estimates of the model. The differences in coefficient values begin when informative priors are added to the
posteriors.
I should mention that at times there is no clear idea what distributional
shape a posterior distribution can take, especially if the model is multidimensional. In such situations, one just lets the MCMC algorithm search to find a
stable posterior, for which the mean, standard errors, and credible intervals
can be taken. Usually, the first 10,000 to 50,000 iterations are discarded until
the searching becomes more directed. This is called the burn-in phase. We do
this because it is not helpful to have distributional values far to the extreme
when using the posterior distribution mean for the estimated parameter value
(coefficient).
The MCMCpack package, which can be installed from CRAN, is an R package (see Table 9.11) that has a number of functions performing Bayesian
inference using posterior simulation. As an example, I will first use the MCMCpoisson function to obtain Bayesian Poisson estimates of parameters of
the medpar data:
# GLM POISSON
Coefficients:
Estimate
Std. Error z value
(Intercept) 2.33293
hmo
-0.07155
0.02721
0.02394
85.744
-2.988
2e-16 ***
0.00281 **
white
-0.15387
0.02741
-5.613
1.99e-08 ***
type2
type3
0.22165
0.70948
0.02105
0.02614
10.529
27.146
2e-16 ***
2e-16 ***
confint.default(poi)
2.5 %
251
Pr(|z|)
97.5 %
(Intercept) 2.2796061 2.38626006

hmo
-0.1184786 -0.02462001
white
-0.2075991 -0.10014302
type2
type3
0.1803908
0.6582513
0.26291271
0.76070204
Compare these results with parameter estimates based on simulation.

The results are nearly identical. Note also that we discarded the first 5000
(burnin = 5000), which is given in the display that follows, with valid iterations used in estimation being from 5001 to 105,000; 100,000 valid iterations
created the posterior distribution from which the mean, standard errors, and
credible intervals were taken. This has always struck me as a validation of
using these statistical methods, where two very different estimation processes
result in nearly identical statistical values.
The nice thing about using Bayesian modeling is that highly complex
mixed models can be estimated the same way. Using frequentist methods,
such as maximum likelihood and quadrature, results in values similar to
those obtained using the simulation method of MCMC:
# BAYESIAN POISSON
Iterations = 5001:105000
Thinning interval = 1
Number of chains = 1
Sample size per chain = 1e+05
1. Empirical mean and standard deviation for each variable,
plus standard error of the mean:
Mean
SD
Naive SE
(Intercept) 2.33266 0.02729 8.629e-05
Time-series SE
0.0003650
hmo
white
-0.07172 0.02364 7.475e-05

-0.15383 0.02750 8.697e-05
0.0003381
0.0003764
type2
type3
0.22174 0.02077 6.568e-05

0.70914 0.02597 8.213e-05
0.0002661
0.0004182
252
2. Quantiles for each variable:

2.5%
25%
50%
75%
97.5%
(Intercept) 2.2789 2.31432 2.33289 2.3511 2.38545

hmo
-0.1183 -0.08756 -0.07163 -0.0558 -0.02563
white
-0.2073 -0.17254 -0.15395 -0.1352 -0.09988
type2
type3
0.1801
0.6578
0.20782
0.69171
0.22194
0.70929
0.2361
0.7265
0.26160
0.76031
There are two basic MCMC methods in common use at this time. The first,
and first to be developed for this class of models, is the MetropolisHastings
algorithm. The second is Gibbs sampling. Both have had numerous variations
developed from the originals.
The foremost software packages used for Bayesian modeling are
WinBUGS/OpenBUGS, JAGS, SAS Genmod, SAS MCMC, and MLwiN. Cytels
LogXact can also perform MCMC-based modeling. Analysts often use R
directly to create Bayesian models, but it is much easier to employ software
that has already-developed built-in simulation routines with error checks,
graphics, and so forth. WinBUGS is popular and is the subject of numerous
books, but the developers have stopped development and are putting their
help and development tools into OpenBUGS. JAGS is an acronym for Just
Another Gibbs Sampler. It can be run through the R environment by using
the R2jags package on CRAN.
SAS is also an excellent tool for Bayesian modeling. I used SASs Genmod
for displaying examples of Bayesian negative binomial models in Hilbe (2011).
For those interested in Bayesian modeling and its relationship to frequencybased modeling, I recommend Zuur, Hilbe, and Ieno (2013). The book compares fully worked-out examples using both traditional frequency-based modeling and Bayesian modeling of both generalized linear models (GLMs) and
generalized linear mixed models (GLMMs), including normal, logistic, betabinomial, Poisson, negative binomial, and gamma regression. R and JAGS
code are used throughout. I also recommend Hilbe and Robinson (2013),
in which R code for writing a MetropolisHastings algorithm is provided in
annotated form. JAGS code for the medpar model in this section is provided
on the books web site.
9.9 SUMMARY
This chapter has covered various more advanced count models used by
analysts. However, I only provided a brief overview of the subject area. I
9.9 Summary
253
have placed additional material for many of these models on the books web
site in an electronic book titled Extensions to Modeling Count Data. I intend
to provide timely updates to the e-book at http://works.bepress.com/joseph
hilbe/.
I began the chapter discussing exact Poisson modeling, which is recommended when a dataset is small and unbalanced; e.g., for a highly unequal
ratio of 1s and 0s in binary variables, highly unequal number of observations
per level in categorical models, or highly skewed, bifurcated, or multimodal
data for continuous predictors. The p-values are exact, not asymptotic.
Truncated and censored count models are important models to have in
ones tool chest. Neither have been available in major commercial statistical
packages. Limdep was the only software offering Poisson and negative binomial truncated and censored models until they were added to the R gamlss
package (Stasinopoulos, Rigby, and Akantziliotou 2008) by Bob Rigby for
Hilbe (2011). Statas new treg command (Hardin and Hilbe 2014b) provides truncated models for Poisson, NB2, PIG, generalized Poisson, NB-P,
and NB-F. Censored models for these distributions will be available in later
2014.
We also discussed finite mixture models, where we find that a count variable can be composed of counts from different data-generating mechanisms.
I believe that this model will have increased use in the future as well.
A brief look at the nonparametric modeling of count data was given in Sections 9.4 and 9.5. Space prohibited a longer exposition. See Hilbe (2011) for
more details, as well as extensions to MCD. I highly recommend Zuur (2012)
for dealing with GAM analysis of count data. This chapter also examined
longitudinal count models, three-parameter models, and the newer Bayesian
modeling of count data that is only now becoming popular. I hope that the
overview of count models provided in this book encourages you to read more
about this class of models and to incorporate them into your research.
APPENDIX
SAS Code
A
dditional SAS code for models, graphs, and tables is located at http://
works.bepress.com/joseph hilbe/.
My appreciation goes out to Sachin Sobale, team leader for statistical and
SAS programming, and Ashik Chowdhury, senior biostatistician, both at Cytel
Corporation, India, for their good help in preparing the majority of the
SAS code in this appendix. My appreciation is also given to Yang Liu, Sam
Houston State University, for providing the SAS code to generate observed
versus predicted Poisson and NB2 tables and figures (final Appendix section
code). I thank Valerie Troiano and Kuber Dekar of the Institute for Statistics
Education (Statistics.com) for arranging Cytels assistance in this project.
POISSON
/*To call the data from .csv (excel) file*/
proc import OUT= WORK.rwm5yr
DATAFILE= "D:\sas code from R and stata\rwm5yr.csv"
DBMS=CSV REPLACE;
GETNAMES=YES;
DATAROW=2;
run;
/*Select data for year = 1984*/
data rwm1984;
set rwm5yr;
where year = 1984;
run;
255
256
APPENDIX
/*To get the output similar to STATA on page 42 */

proc freq data = rwm1984;
tables docvis/outcum;
run;
proc means data = rwm1984 n
var docvis ;
run;
mean std min max ;

data pois;
x =
run;
poisson(3.162881,0);
proc print data = pois;

run;
proc freq data = rwm1984;
tables outwork/outcum;
run;
proc means data = rwm1984 n mean std min max ;
var age ;
output out = summ (drop = _freq_ _type_) mean = meanage;
run;
proc sql;
select count (age) as total,count (distinct age) as distinct
from rwm1984;
quit;
/*derive deviation from the mean*/
data cage;
if _N_ = 1 then set summ;
set rwm1984;
cage = age - meanage;
run;
257
SAS Code

proc genmod data = cage;
model docvis = outwork cage / dist = poisson
link = log;
run;
/*Alternate approach to get the output similar to what we are getting
using proc genmod(previous model)*/
proc nlmixed data = cage ;
parms _cons=0 _outwork=0 _cage=0;
xb=_cons+_outwork*outwork+_cage*cage;
mu = exp(xb);
model docvis poisson(mu);
run;
POISSON WITH PEARSON DISPERSION SCALED SES

/*Call data medpar from .csv file*/
proc import OUT= WORK.Medpar
DATAFILE= "D:\sas code from R and stata\medpar.csv"
DBMS=CSV REPLACE;
GETNAMES=YES;
DATAROW=2;
run;
/*Poisson with Pearson dispersion scaled SEs */
proc genmod data = Medpar ;
model Length_of_Stay =
HMO_readmit_ __White Urgent_Admit

Emergency_Admit / dist = poi
link = log
scale = PEARSON;
run;
POISSON WITH ROBUST VARIANCE ESTIMATOR

/*Sort the data set*/
proc sort data = Medpar;
by descending type;
run;
258
APPENDIX
/*Robust SEs from page 84 */

proc genmod data = Medpar order = data;
class type Provider_number
;
model Length_of_Stay = type HMO_readmit_ __White
poi link = log;
repeated subject =
/ dist =
Provider_number;
run;
POISSON WITH EXPOSURE (OFFSETS)

/*To create fasttrakg data as given on page 53
data fasttrakg;
*/
input die cases anterior hcabg killip kk1 kk2 kk3 kk4;
datalines ;
5 19
10 83
15 412
0 0 4 0 0 0 1
0 0 3 0 0 1 0
0 0 2 0 1 0 0
28 1864 0 0 1 1 0 0 0
1 1
0 1 4 0 0 0 1
0 3
0 1 3 0 0 1 0
1 18
2 70
10 28
0 1 2 0 1 0 0
0 1 1 1 0 0 0
1 0 4 0 0 0 1
9 139 1 0 3 0 0 1 0
39 443 1 0 2 0 1 0 0
50 1374 1 0 1 1 0 0 0
1
3
2
6
16
27
1 1 3 0 0 1 0
1 1 2 0 1 0 0
1 1 1 1 0 0 0
run;
/*data shown on page 53 */
proc print data= fasttrakg;
run;
/*Create offset variable*/
data fasttrakg;
set fasttrakg;
lncase = log(cases);
run;
259
SAS Code

ods output parameterestimates = estimate;
proc genmod data = fasttrakg ;
model die = anterior hcabg
kk2 kk3 kk4 /
dist = poisson
link = log
offset = lncase;
run;
/*To get the actual result from the preceding model by
exponentiating the estimates*/
data fast;
length parameter $15 IRR 8 StdErr 8 lowerci 8 upperci 8
ProbChiSq 8;
set estimate;
where parameter ne Scale;
IRR = exp(estimate);
lowerci = exp(LowerWaldCL);
upperci = exp(UpperWaldCL);
StdErr=sqrt(exp(estimate)**2*exp(StdErr**2)*(exp(StdErr**2) - 1));
keep parameter IRR StdErr lowerci upperci ProbChiSq;
run;
proc print data = fast;
run;
POISSON WITH MARGINAL EFFECTS (BOTH AVERAGE ME AND

ME AT THE MEAN)
/* To get an estimate similar to STATA on page 56 using rwm1984 data*/
ods output parameterestimates = estimate;
proc genmod data = rwm1984 ;
model docvis =
outwork age/ dist = poi

link = log;
run;
/*Take the average of age and outwork*/
proc means data = rwm1984 noprint;
var outwork age;
output out = summ(drop = _type_ _freq_) mean = outwork age;
run;
260
APPENDIX
proc transpose data = summ out = trns (rename = (_name_ =

parameter col1 = mean));
var outwork age;
run;
proc sort data = estimate;
by parameter;
run;
proc sort data = trns;
by parameter;
run;
data full;
merge estimate trns;
by parameter;
where parameter ne Scale;
if mean ne . then
coeff = mean*estimate;
else if mean = . then coeff = estimate;
run;
proc univariate data = full noprint;
var coeff;
output out = total sum = xb;
run;
data full1;
set total; set full (where = (parameter = age));
dfdxb = exp(xb)*estimate;
run;
/* To get the output similar to STATA on page 56 */
/*Marginal Effects at mean */
proc print data = full1;
var dfdxb;
run;
/*Take the average of age and outwork*/
proc means data = rwm1984 noprint;
var docvis;
output out = summ_(drop = _type_ _freq_) mean =
run;
docvis;
261
SAS Code
data full_;
set summ_; set full (where = (parameter = age));
dfdxb_avg = docvis*estimate;
run;
/* To get the output similar to STATA on page 57 */
/*Average marginal effects*/
proc print data = full_;
var dfdxb_avg;
run;
NB2 NEGATIVE BINOMIAL (TRADITIONAL)

/*NB2 output on page 104 using rwm1984 data*/
proc genmod data = rwm1984 ;
class id;
model docvis =
dist = nb;
outwork age female married edlevel2 edlevel3 edlevel4 /
repeated subject = id;

run;
ZERO-INFLATED POISSON
/*To get the output of STATA on page 145 */
/*To get the IRR and corresponding CIs exponentiate the estimate and
CIs derived from the following model*/
proc genmod data = rwm1984;
model docvis = outwork age /dist=zip;
zeromodel outwork age /link = logit ; /*zeromodel option is
available in SAS 9.2 or later version*/
run;
ZERO-INFLATED NEGATIVE BINOMIAL

/*To get the output of STATA on page 147 */
/*To get the IRR and corresponding CIs exponentiate the estimate
and CIs derived from the following model*/
model docvis = outwork age /dist=zinb;
zeromodel outwork age /link = logit ; /*zeromodel option is available
in SAS 9.2 or later version*/
run;
262
APPENDIX
ZERO-TRUNCATED POISSON
/*Zero truncated poisson output of STATA on page 129 */
proc nlmixed data=Medpar;
xb = intercept + hmo*HMO_readmit_+ white*__White
+Type2*Urgent_Admit
+Type3*Emergency_Admit;
ll = Length_of_Stay*xb - exp(xb) - lgamma(Length_of_Stay + 1)
- log(1-exp(-exp(xb)));
model Length_of_Stay ~ general(ll);
run;
ZERO-TRUNCATED NEGATIVE BINOMIAL

/*Zero truncated negative binomial output on page 130 */
proc nlmixed data=Medpar;
xb = intercept + hmo*HMO_readmit_+ white*__Whit
+Type1*Elective_Admit;
mu = exp(xb);
m = 1/alpha;
ll = lgamma(Length_of_Stay+m)-lgamma(Length_of_Stay+1)-lgamma(m) +
Length_of_Stay*log(alpha*mu)(Length_of_Stay+m)*log(1+alpha*mu)
- log(1 -( 1 + alpha*mu)**(-m));
model Length_of_Stay general(ll);
run;
FINITE MIXTURE MODEL

/*To get the output similar to pages 164 and 165 using medpar data*/
/*To get the estimate for poisson distribution change dist=negbin
to dist = poisson in the following model */
proc fmm data=rwm1984; /*proc fmm is available in SAS 9.2 or later
version*/
model docvis = outwork age /dist=negbin k = 2 cl;
run;
OBSERVED VERSUS PREDICTED COUNTS CHI2 GOODNESS-OF-FIT

(020 VISITS)
/* Poisson Regression - Observed vs Expected Doctor Visits */
/*Directly open data set,then restore it under work library. These two
lines are not needed if import by clicking */
SAS Code
data rwm1984; set tmp3.rwm1984;

run;
/* Get observed counts */
proc freq data=rwm1984;
table docvis / out=obs (rename=(count=observe));
run;
proc means data=obs;
var observe;
output out=sum1 sum=;
run;
/* Create a macro variable for number of observations */
data sum; set sum1;
call symput("number",observe);
run;
/* Build Poisson model */
model docvis = outwork age / dist=poisson;
ods output ParameterEstimates=pe;
run;
* Transpose parameter estimate */
proc transpose data=pe out=estparms;
var estimate; id parameter;
run;
/* Prepare for proc score step */
data estparms; set estparms;
drop scale;
_TYPE_="PARMS";
run;
/* Add intercept to data so Var is not needed in proc score */
data datacopy; set rwm1984;
Intercept=1;
run;
/* Get scores for poisson process */
proc score data=datacopy score=estparms out=pred type=PARMS;
run;
/* Compute predicted probabilities of specified counts 0-20 */
data pred; set pred;
263
264
APPENDIX
do i= 0 to 20;
if estimate=. then py=.;
py=pdf(poisson,i,exp(estimate)); output; end;
keep i py;
run;
/* Obtain the average of the above probabilities */
proc means data=pred;
class i;
output out=means mean(py)=;
run;
/* Obtain the expected (predicted) counts */
data expect; set means;
drop _type_ _freq_;
if i=. then delete;
expect=py*&number;
run;
/* Join data sets and create table */
proc sql;
create table exptobs as
select i as count,observe,expect,observe-expect as diff
from expect as l left join
obs as r
on l.i=r.docvis;
run;
/* Get proportion */
data prop; set exptobs;
obsprop=observe/&number*100;
preprop=expect/&number*100;
diffprop=diff/&number*100;
drop observe expect diff;
run;
/*Calculate the difference between observed and expected proportion
and then divide the result by expected proportion (def. Chi
square = sum((square(o-e))/e)*/
data count_; set prop;
diff_sq = diffprop*diffprop;
if preprop ne 0 then
div = diff_sq/preprop;
run;
SAS Code
265
/* Taking summation of (observed-expected)**2/expected */

proc means data = count_ noprint;
var div;
output out = summ (drop = _freq_ _type_)sum = obs_chisq n = n;
run;
/* Calculate tabulated chi square value and p value */
data chi; set summ;
alpha = 0.05;
df = n-1;
chi_table = cinv((1-alpha),df);
p_value =put(1-probchi(obs_chisq, df), pvalue6.4);
run;
/* Print the Chi2 GOF statistic */
proc print data = chi;
run;
/* Print the table */
title1 h=2 justify=c "Table 3.6 Observed versus Predicted Counts";
proc print data=exptobs noobs;
run;
title1;
/* Plot the figure */
title2 h=2 justify=c "Figure 3.1 Observed vs Expected Doctor Visits";
axis1 label= (angle= 90 "Doctor Visits");
axis2 label= ("Number Visits to Physician");
legend1 label=none frame;
proc gplot data=exptobs;
plot observe*count expect*count/overlay haxis=axis2 vaxis=axis1
legend=legend1;
symbol1 interpol=join width=1.5 value=triangle c=steelblue;
symbol2 interpol=join width=1.5 value=circle c=indigo;
run;
title2;
/* Negative Binomial Regression - Observed vs Expected Doctor Visits */
/* Build NB2 model */
model docvis = outwork age / dist=negbin;
ods output ParameterEstimates=pe_nb;
run;
266
APPENDIX
/* Transpose parameter estimate */

proc transpose data=pe_nb out=estparms_nb;
var estimate; id parameter;
run;
/* Create a macro variable for alpha */
data alpha; set estparms_nb;
call symput("alpha",dispersion);
run;
/* Prepare for proc score step */
data estparms_nb2; set estparms_nb;
_TYPE_="PARMS";
drop dispersion;
run;
/* Add intercept to data so Var is not needed in proc score */
data datacopy_nb; set rwm1984;
Intercept=1;
run;
/* Get scores for NB2 process */
proc score data=datacopy_nb score=estparms_nb2 out=pred_nb type=PARMS;
run;
/* Compute predicted probabilities of specified counts 0-20 */
data pred_nb; set pred_nb;
do i= 0 to 20;
if estimate=. then py=.;
py=pdf(NEGBINOMIAL,i,1/(1+&alpha*exp(estimate)),1/&alpha);
output; end;
keep i py;
run;
/* Obtain the average of the above probabilities */
proc means data=pred_nb;
class i;
output out=means_nb mean(py)=;
run;
/* Obtain the expected (predicted) counts */
data expect_nb; set means_nb;
drop _type_ _freq_;
SAS Code
if i=. then delete;

expect=py*&number;
run;
/* Join data sets and create table */
proc sql;
create table exptobs_nb as
select i as count,observe,expect,observe-expect as diff
from expect_nb as l left join
obs as r
on l.i=r.docvis;
run;
/* Get proportion */
data prop_nb; set exptobs_nb;
obsprop=observe/&number*100;
preprop=expect/&number*100;
diffprop=diff/&number*100;
drop observe expect diff;
run;
/*Calculate the difference between observed and expected proportion
and then divide the result by expected proportion (def. Chi
square = sum((square(o-e))/e)*/
data count_nb; set prop_nb;
diff_sq = diffprop*diffprop;
if preprop ne 0 then
div = diff_sq/preprop;
run;
/* Taking summation of (observed-expected)**2/expected */
proc means data = count_nb noprint;
var div;
output out = summ_nb (drop = _freq_ _type_)sum = obs_chisq n = n;
run;
/* Calculate tabulated chi square value and p value */
data chi_nb; set summ_nb;
alpha = 0.05;
df = n-1;
chi_table = cinv((1-alpha),df);
p_value =put(1-probchi(obs_chisq, df), pvalue6.4);
run;
267
268
APPENDIX
/* Print the Chi2 GOF statistic */

proc print data = chi_nb;
run;
/* Print the table */
title3 h=2 justify=c "Table 3.7 Observed versus Predicted Counts-NB2";
proc print data=exptobs_nb noobs;
run;
title3;
/* Plot the figure */
title4 h=2 justify=c "Figure 3.2 Observed vs Expected Doctor
Visits-NB2";
axis1 label= (angle= 90 "Doctor Visits");
axis2 label= ("Number Visits to Physician");
legend1 label=none frame;
proc gplot data=exptobs_nb;
plot observe*count expect*count/overlay haxis=axis2 vaxis=axis1
legend=legend1;
symbol1 interpol=join width=1.5 value=triangle c=steelblue;
symbol2 interpol=join width=1.5 value=circle c=indigo;
run;
title4;
CENSORED POISSON MODEL

/* Hilbe, Censored Poisson, cenpois.sas. See Book web site
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Index
AIC (Akaikes Information Criterion)

AIC, 40, 116, 117, 197
AICC, 117, 118
AICFS , 117
AICH , 118, 120, 121, 209
CAIC (Consistent AIC), 117
Akaike, H., 43, 116117, 269
Akantziliotou, C., 253, 274
alpha parameter, 1114, 134, 135, 152, 159,
163, 165, 168, 179
Amemiya, T., 224, 269
Anscombe, F. J., 169
Anscombe residual. See residual
apparent overdispersion, 3941
Bailey, M., 233, 269
Barnett, A. G., 118, 269
Bayesian information criterion. See BIC
Bayesian models, 8, 15, 22, 23, 118, 119,
248253
Bernoulli, 20, 249
beta, 4, 111
beta-binomial, 252
BIC, 44, 199
Hannan and QuinnBICHQ , 119, 120
Raftery BIC, 121, 122
Schwarz BICL , 119
binomial
distribution, 10, 11, 127, 129, 132, 133,
136, 163, 170, 179, 182, 196, 211, 226,
249
logistic regression, 20, 106, 187

logit, 20, 41, 97, 113, 165, 184186, 188,
193196, 208, 230, 231
bootstrap, standard errors, 37, 40, 103106,
107, 125
Borle, F., 274
boundary likelihood ratio test, 214
Cameron, A. C., 269
canonical
link, 24, 31, 127, 128
negative binomial (NB-C), 127, 128
Carroll, R. J., 96, 269
censored negative binomial, 115
censored Poisson, 20, 40, 115, 217, 230,
231, 268
survival (Hilbe), 229
centering, 50
chi-square (chi2)
dispersion, 37, 38, 93, 94
distribution, 76, 115
statistic, 78, 79, 81, 87, 111, 136, 156
test, 38, 87, 88, 91, 107, 115, 155
Close, A., 270
Collins, M. A., 269
complementary loglog (cloglog), 189, 195
Conde-Sanchez, A., 274
conditional distributions, 218
fixed effects, 241
maximum likelihood, 22
mean, 238
277
278
confidence intervals
bootstrap, 105
exact, 223234
Poisson, 58
profile likelihood, 106
risk ratio, 59, 206
consistent estimator, 34
Consul, P. C., 211, 269
Conway, R. W., 245, 269
correlation
between panels, 241
within panels, 132
correlation structures
autoregressive, 239
exchangeable, 230240
independence, 239
unstructured, 239
count-related distributions
inverse Gaussian, 162166, 170, 172, 192,
206, 245
lognormal, 195
Poisson inverse Gaussian, 161171
shifted Poisson, 174
uniform, 42, 63, 132, 134, 135, 157,
250
Wald, 106
See also negative binomial; Poisson
covariate pattern, 64
Cox regression, 52
Cragg, J. C., 184, 269
CRAN, xiii, 11, 48, 80, 93, 135, 185, 247,
250, 252
credible interval, 22, 250, 251
cumulant, 31, 32, 128
Cytel, 218, 224, 252, 255
Dean, C., 269
degrees of freedom, 43, 48, 76, 77,
79
delta, 59, 82, 95, 142, 214
method, 59, 60, 62, 95
parameter, 145, 181, 214, 215
Demietrio, C. G. B., 272
Desmarais, B.A., 201, 270
deviance
dispersion, 4648, 79
function, 96, 97, 121
INDEX
goodness-of-fit test, 77
residuals, 158
statistic, 75, 76, 78, 98, 113
Dhavala, S. S., 245, 270
discrete change, 35, 68, 7172
dispersion
equi-, 9, 35, 82, 84, 129, 134, 152, 153
extra-, 39, 41, 73, 84, 103, 107, 125, 132,
158, 161, 196, 221, 223
over-, 912, 74107, 123125, 156160
Pearson, 43, 46, 47, 79, 81, 92, 93, 97, 98,
107, 196, 221, 257
under-, x, 11, 12, 33, 48, 83, 124, 136,
156, 212214, 221, 245
dispersion statistic, 35, 37, 3941, 4347, 51,
7984, 92, 93, 97, 126, 127, 131137,
149153, 157, 181, 196, 221, 245
distributions, probability
Bernoulli, 20, 249
beta, 4, 46, 92, 111, 224, 248, 252
binomial, 41, 92, 206
binomial-logit, 189, 209
chi-square (chi2), 37, 38, 7694, 107,
111, 115, 131, 136, 155, 156, 262
complementary loglog (cloglog), 184,
189, 195
double Poisson, 208, 245
exponential, 23, 31, 96, 127, 128, 163
frequency, 8, 19, 34, 38, 122, 137, 250,
252
gamma, 10, 11, 129, 132, 133, 135, 162,
163, 249
generalized Famoye negative binomial,
226
generalized Waring negative binomial,
209, 245248
generalized Poisson, 210215, 226246
geometric, 110, 129, 184
inverse Gaussian, 162166, 170, 172,
192, 206, 245
lognormal, 195
Poisson inverse Gaussian, 161171
shifted Poisson, 174
uniform, 42, 63, 132, 134, 135, 157, 250
Wald, 106
See also negative binomial; Poisson
Dobson, A., 269
Index
Dohoo, I., 270

double Poisson, 208, 245
Efron, B., 245, 270
Ellis, D. D., 270
empirical standard errors, 40, 102106, 133,
149
equidispersion, 9, 35, 82, 84, 129, 134, 152,
153
estimation
EM (expectation maximization), 243
maximum likelihood (MLE), 23
quadrature 23, 31, 183, 243, 251
See also IRLS
estimators
biased, 10, 48, 78, 84, 197, 201
robust variance, 98101, 138, 159,
168169, 257
unbiased , 8, 34
exact Poisson regression, x, 11, 15, 22,
217224, 253
expected information matrix, 128
exponential distribution, 184
exposure, 6266
extradispersion, 39, 41, 73, 84, 103, 107,
125, 132, 158, 161, 196, 221, 223
Fabermacher, H., 183, 270
Faddy, M., 245, 270, 274
Famoye, F., 211, 245, 270
Faraway, J., 243, 270
finite mixture models, 232235
Fisher, R. A., 8
scoring, 97, 223
fixed effects, 241
Flaherty, S., 156, 270
Freese, J., 138, 273
frequentist, 249251
gamma distribution. See distributions
Geedipally, S. R., 245, 270, 273, 275
Gelman, A., 270
generalized additive models, 21, 235
generalized estimating equations (GEE), 15,
23, 239
Genmod, 31, 128, 131, 240, 252
Gillooly, D., xv
279
GOF. See goodness-of-fit

Goldberger, A. S., 224, 270
goodness-of-fit (GOF)
boundary likelihood ratio, 38, 108, 112,
114, 125, 153, 197
chi-square (chi2), 8891
deviance, 7578
likelihood ratio test, 59, 78, 106, 108,
112115, 123, 136, 155, 205, 207, 214,
244
Pearson. See chi-square
Gordon, J. M., xv, 269
Greene, W. H., xv, 9, 11, 153155, 270, 272
Griliches, Z., 271
grouped logistic, 106
Gruen, B., 273
Guikema, S. E., 245, 273
Hall, B. H., 271
Hamilton, L. C., 270
Hannan, E. J., 119, 270
Harden, J. J., 201, 269
Hardin, J. W., xiii, 11, 101, 110, 111, 118,
165, 194, 201, 211, 226, 240, 246, 248,
271
Harris, T., 211, 246, 248, 271
Hastie, T., 236, 271
hat matrix diagonal, 109, 168
Hausman, J., 122, 271
Hausman test, 122
He, H., 274
Heckman, J., 271
Heilbron, D., 271
Henning, K. S. S., 275
Hessian matrix, 25, 30, 57, 98
heterogeneity, 10, 110, 133, 182
gamma, 10
parameter, 11
Poisson, 11
heteroskedastic, 99
hierarchical (multilevel) models, 218, 239,
241
Hilbe, J. M., xiii, 11, 22, 23, 25, 101, 105,
106, 110112, 118, 128, 142, 154, 156,
165, 188, 191, 224, 226, 229, 233, 238,
240, 243, 246, 248, 252, 253, 270,
271275
280
Hill, J., 270

Hin, L., 272
Hinde, J., 272
Huber, P. J., 272
hurdle models, 15, 19, 20, 165, 173, 174,
180, 184, 185, 187, 189, 191196, 208,
230
negative binomial-logit, 189, 209
PIG-logit, 165, 192194
PIG-Poisson, 194, 195, 208, 209
Poisson-logit, 231
Poisson-lognormal, 195
Hurvich, C. M., 273
hypergeometrix2F1 function, 110, 111
hypothesis test, 205
Ieno, E. N., 23, 156, 233, 243, 252,
275
incidence rate ratio (IRR), 6264
information, 10, 21, 22, 43, 44, 103, 108,
116, 117, 119, 121, 124, 128, 139, 141,
156, 189, 209, 227, 249
Fisher, 97, 223
criterion, 108, 116, 117, 119, 121, 124,
156, 189; QIC (quasi-likelihood), 40,
74, 75, 9698, 100, 118, 129, 130, 239
matrix(-ces): expected, 128; observed,
128
informative prior, 250
interaction, 18, 41, 51, 56, 76, 79, 82, 83,
111, 136
inverse link, 29, 32, 202203
IRLS, xii, 22, 23, 25, 3133, 75, 92, 9798,
108, 127, 147, 152, 160, 236
Irwin, J. O., 246, 273
JAGS, 252
jitter(ing), 237, 239
INDEX
Leisch, G., 273

likelihood, 2225, 2933, 9799, 112115,
249251
boundary, 38, 108, 112, 114, 115, 125,
136, 153, 197, 205
function, 24, 25, 237
quasi-, 9697, 101
ratio test, 112115, 205
Limdep, 11, 31, 119, 131, 134, 153, 160,
226, 253
linear predictor, 6, 7, 16, 17, 29, 51, 67, 108,
109
link
canonical. See canonical link
complementary loglog. See distributions
function, 17, 24, 29, 31, 32, 109, 131
inverse, 29
log, 145
logit, 96, 97
noncanonical, 128
log-gamma, 130
logistic, 1120, 52, 106, 108, 113, 189, 190,
201, 206, 218, 252
log-likelihood
hurdle, 185, 188
NB-C, 189
NB-P, 9, 12, 126, 145, 153156, 160, 163,
174, 182, 194, 197, 209, 226, 228, 229,
245
negative binomial, 126161
Poisson, 3573; censored, 229231;
generalized, 210216; zero-inflated,
199202; zero-truncated, 174177,
225228
lognormal distribution. See distributions
LogXact, 218, 224, 252
Long, J. S., 138, 273
Lord, D., 245, 270, 273, 275
Lutz, P. W. W., 270
Koper, N., 269

Lagrange multiplier test, 85, 87
Lawless, J. F., 269, 273
least squares estimation
weighted, xii, 23, 32, 79, 236
See also ILRS
Machado, J. A. F., 237

Maindonald, J., 273
Manseau, M., 269
marginal effects, 6872, 191, 239, 259
Markov Chain Monte Carlo (MCMC), 22,
23, 250
281
Index
Martin, W., 270

Martnez-Rodrguez, A. M., 274
matrix(-ces)
hat matrix diagonal, 109, 168
Hessian, 25, 30, 57, 98
Maxwell, W. L., 245, 269
McCullagh, P., 273
McCulloch, C. E., 53, 274
MCMC. See Markov Chain Monte Carlo
Merkle, E. C., 274
Metropolis-Hastings, 23, 252
Miranda, A., 245
misspecification, 111, 223
modified sandwich variance, 101
Monte Carlo, 35, 43, 45, 47, 224
Morel, J. G., 185, 273
Muenchen, R. A., 273
Mullahy, J., 184, 273
Neerchal, N. K., 185, 273
negative binomial (NB)
Bayesian, 252
censored, 115
generalized, 11, 134, 153, 182, 245
generalized Faddy, 245
generalized Waring, 245
heterogeneous (NB-H), 153, 159, 160
NB1 (linear), 141
NB2 (quadratic): censored, 115;
overdispersed, 10, 33, 95, 129, 131,
132, 134, 136, 152, 160, 163, 168, 170,
181, 182, 196; regression, 245;
zero-inflated, 196, 197, 202;
zero-truncated 177180
Nelder, J., xiv, 96, 273
Newbold, E. M., 246, 273
Newton-Raphson, 30, 108
noninformative prior, 250
observed frequency, 137
observed information matrix, 128
offset, 63, 64, 233
Olmo-Jimenez, M. J., 274
OpenBUGS, 252
outliers, 41, 82, 83, 110, 124
overdispersion
apparent, 39, 72, 81, 85

real, 72, 85, 86, 106
See also Poisson
Pan, W., 118, 273
panel models, 15, 23, 241
parameterization, 15, 63, 115, 119, 120, 127,
129131, 133135, 151, 211, 229
parameters
ancillary, 10
canonical. See link function
heterogeneity. See heterogeneity
parameter
liability, 246, 247
mean, 12, 130
proneness, 246248
randomness, 246
scale, 12, 24, 76, 110, 118, 215, 229,
245
partial effects, 68, 71, 72
Patenaude, G., 270
Pearson
dispersion, 43, 47, 51, 79, 81, 84, 92, 93,
97, 98, 107, 196, 221
residuals, 79, 81, 111, 135
See also chi-square (chi2)
Poisson
canonical, 24, 31, 128
censored. See censored Poisson
double, 208, 245
gamma mixture, 10, 129, 132, 245
generalized, 9, 12, 38, 207, 209, 210, 211,
213215, 226, 245, 246
inverse Gaussian, 9, 11, 19, 73, 161163,
170, 172
inverse Gaussian, zero-inflated, 206
inverse Gaussian, zero-truncated, 174,
180
overdispersion, 911, 39, 78, 84, 157,
158, 168, 214, 245
probability, 2527, 36, 211, 225
process, 245
quasi-, 223
shifted, 174
truncated, 225228
zero-inflated, 19, 125, 196199, 207
282
Poisson (cont.)
zero-truncated, 20, 37, 115, 174, 176,
196, 222, 225
population averaged models, 239
posterior distribution, 23, 249251
Pregibon, D., 96, 273
Priede, I. G., 269
prior, 249250
probability distribution. See distributions,
probability
profiling, 59
probit, 1920, 184, 195, 198
proneness, 82, 111, 246248
QIC, 118
quadrature
estimation (in general), 23, 31, 243,
251
Gaussian-Hermite, 183
quantile count models, 21, 218, 237,
239
quasi-deviance, 97
quasi-likelihood, 75, 9698, 101, 129, 130,
239
quasi-likelihood information criterion
(QIC). See QIC
quasi-Poisson, 223
Quinn, B. G., 270
Rabe-Hesketh, S., 273
rate parameter, 63, 64
rate ratio. See incidence rate ratio
real overdispersion, 73, 85, 86, 106
relative rate ratio (RRR). See risk ratio
residual, 110, 111
rho, 12, 20, 154, 245, 247
Rigby, R., 11, 165, 253, 273, 274
risk ratio, 100, 105, 147
Robinson, A., xiii, xiv, 25, 106107, 252,
272
robust estimator, 99, 101, 159, 222, 223,
235
robust standard errors, 98, 99, 103, 106,
125, 130, 148, 150, 176, 189, 199
Rodrguez-Avi, J., 274
Rouse, D. M., 274
Ruppert, D., 269
INDEX
Saez-Castillo, A. J., 274

sample selection, 224
sandwich standard errors, 99105
Santos Silva, J. M. C., 237, 273
SAS, 56, 252, 255268
scaled standard errors. See standard errors
Schmiegelow, F., 269
Schwarz, G. E., 119, 120, 122, 274
Sellers, K., 245, 274
Shmueli, G., 245, 274
Shults, J., 118, 274
Sichel distribution, 164
Skrondal, A., 273
Smith, D., 245, 248, 270, 274
Smithson, M., 274
standardized coefficients, 56
standardized deviations, 110, 111
standard errors, 9296
standardized residuals, 109111
Stasinopoulos, M., 11, 165, 253, 273,
274
Stat/Transfer, xiii
Stone, C. C., 236, 274
Stryhn, H., 270
studentized residuals, 109
Sveliev, A. A., 275
Tang, W., 274
Taylor expansion, 32
Terza, J. V., 274
Tibsharani, R., 271
treg command, 226, 227, 228
Trivedi, P. K., 269
truncated. See treg command
Tsai, C., 117, 273
Tu, X. M., 274
Tutz, G., 274
underdispersion, xii, 11, 12, 33, 48, 83, 124,
136, 156, 212214, 221, 245
unstructured correlation. See correlation
structures
validation, 112
Vickers, A., 274
Vittinghoff, E., 53, 274
Vuong, Q. H., 274
283
Index
Vuong test, 183, 197, 200, 201, 205, 207,

215, 247
WINBUGS, 252
Winkelmann, R., 275
Wald test, 106

Wang, Y.-G., 118, 272
Wang, Z., 113, 274
Waring, E., 246
Waring, generalized, 209, 245248
Wedderburn, R. W. M., 96, 275
Westfall, P. H., 275
White, H., 99, 274
Xekalaki, E., 245, 246, 275

Yang, Z., 211, 255, 271
Zhu, F., 275
Zou, Y., 275
Zuur, A. F., xiv, 22, 23, 156, 199, 233, 243,
252, 253, 269, 275

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MODELING COUNT DATA

This definitive entry-level text, authored by a leading statistician in the field,

Other Statistics Books by Joseph M. Hilbe

MODELING COUNT DATA

32 Avenue of the Americas, New York, NY 10013-2473, USA

This publication is in copyright. Subject to statutory exception

Some Points of Discussion

Some Points of Discussion

2.3 Constructing a True Poisson Model

4.2.1 Standard Likelihood Ratio Test

Some Points of Discussion

Types of Data and Problems Dealt with in This Chapter

Counts with Multiple Components Finite Mixture Models

Appendix: SAS Code

why this is so, and what can be done about it

on the problem of dealing with both over- and underdispersion, as well

model. I recommend it for those who wish to go beyond the discussions

spurred my interest in the negative binomial model. I am fortunate to have

Varieties of Count Data

SOME POINTS OF DISCUSSION

and a statistical model?

and can we ever truly know them?

r How does a count model differ from other regression models?

problem when modeling count data?

1.1 WHAT ARE COUNTS?

VARIETIES OF COUNT DATA

to observations made about events or items that are enumerated. In statistics,

1.2 Understanding a Statistical Count Model

unclear, I am confident that any problem areas regarding the assessment of

1.2 UNDERSTANDING A STATISTICAL COUNT MODEL

where Y is called the response, outcome, dependent, or sometimes just the y

A model may consist of only the response variable, unadjusted by explanatory

VARIETIES OF COUNT DATA

well-used and basic probability distribution in statistics. is also referred to

with X being understood as the summation of the various terms, including

1.2 Understanding a Statistical Count Model

systolic blood pressure of subject

Using Stata statistical software, we display a linear regression of sbp on male,

VARIETIES OF COUNT DATA

The intercept is defined correctly; check by displaying it. The value is

whereas _b[_cons] is the constant slope of the intercept as given in the

Predicted values may be obtained by

1.2 Understanding a Statistical Count Model

1.2.2 Models and Probability

VARIETIES OF COUNT DATA

FIGURE 1.1. Gaussian distribution approximated by blood pressure data.

of the probability distribution function, which we shall refer to as the PDF,

1.2 Understanding a Statistical Count Model

1.2.3 Count Models

VARIETIES OF COUNT DATA

1.2 Understanding a Statistical Count Model

overdispersion. The negative binomial dispersion parameter will be symbolized as (alpha).

VARIETIES OF COUNT DATA

TABLE 1.1. Selected Count Model MeanVariance Relationship

software program. It is called NB-P. The dispersion parameter, , of negative

1.2 Understanding a Statistical Count Model

TABLE 1.2A. R Code for Figure 1.2a

5 Count Distributions: mean = 4; alpha = 0.5

FIGURE 1.2A. Five count distributions: mean = 4; alpha = 0.5.