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Questions tagged [applied-econometrics]

Use this tag to discuss empirical papers and issues arising when applying theoretical models to data. For theoretical econometric issues, use the `econometrics` tag

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27 views

What are the true normalized cointegration vectors in R (ca.jo, cajorls and VECM functions) and how to interpret them?

I'm struggling with understand the difference between (and why there is this difference) the normalized cointegration vectors provided by the ca.jo function and the ...
2 votes
1 answer
133 views

How to predict income n years after graduation using income dataset with age, but not graduation year?

I'm trying to predict the income of graduates of certain Master's programs n years after graduation, using the American Community Survey individual level dataset to calibrate my equation. It gives me ...
0 votes
1 answer
41 views

Estimate a simple regression (homework question)

The Director of UNAM’s Student Affairs would like to investigate the relationship between the number of hours (X) students spends campaigning and the percentage of votes (Y) they end up receiving in ...
2 votes
1 answer
33 views

Is there any downside to synthetic control compared to differences-in-differences model?

Synthetic control seems to me to be simply a version of differences-in-differences model, where the assumption of parallel trends is satisfied by construction, since the synthetic control to the ...
0 votes
0 answers
16 views

Aggregate Demand and Aggregate Supply

Suppose the economy is at full employment and aggregate demand falls. Show the effects on output and prices in the short-run. Also, show how the Keynesian aggregate supply adjusts over time to bring ...
1 vote
1 answer
114 views

Cointegration in stock market between different market places

Hi guys im interested in cointegration in stock market between Brazil, USA, London, China, India, Argentina and Hong Kong. Since I want to compare each country’s index to the BR index, how do i do to ...
3 votes
1 answer
36 views

Variable dropped for collinearity in feols package in R (TWFE)

sorry if this is a basic question (I'm new to econometrics). I have the following regression model: $Y_{i,t} = \alpha_i + \gamma_t + \beta_1\cdot X_{1,i,t} + \beta_2 \cdot X_{2,i} + \beta_3 \cdot X_{3,...
2 votes
1 answer
63 views

Difference between unconfoundedness and parallel trends

I understand the unconfoundedness (selection on observables) assumption to be that the expected value of an outcome is independent of treatment after controlling for observed regressors (since these ...
4 votes
1 answer
65 views

Random Utility Model Multiple Choice Question. Which one is correct?

In this random utility model, which of the five statements is true? I've been thinking about this question ever since the exam... I said (B).
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Model specification - time series. Estimation of the effect of human capital on growth

Thank you for your help in advance ! I'm working on a research project at undergraduate level on the effect of human capital on growth in Nigeria from 1980 to 2018. My current model specification is : ...
1 vote
0 answers
32 views

How to run an event study with many individuals and few observations per individual?

I am trying to run a study on bond issuance, with a specific policy shock that occurred for all units simultaneously. I was planning to use DiD methods, however I'm only observing an individual ...
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In the supply demand model $Q_s=a_0+a_1P+u$ and $Q_d=b_0+b_1P+b_2Y+v$, is it true that $a_0,a_1$ are identified while $b_0,b_1,b_2$ are not?

In the supply demand model $Q_s=a_0+a_1P+u$ and $Q_d=b_0+b_1P+b_2Y+v$ and $Q_s=Q_d$, where $P$ is price, $Y$ is income, $u,v$ are the unobserved error terms. what are the identified parameters and ...
1 vote
0 answers
18 views

What's a classic (paper) example in which OLS gives unreasonable result, but IV estimate gives reasonable result?

I'm wondering are there are any classic papers, especially in the field of labor economics or development economics, that include regression tables showing OLS gives unreasonable result(like ...
1 vote
1 answer
39 views

What kind of data should I use for estimating price elasticity of demand?

I’m planning to use the log-log model to estimate price elasticity of demand $$\ln(Q) = \beta_0 +\beta_1\ln(P) $$ I’m already aware of its drawbacks and that there are other estimation methods, but I ...
3 votes
3 answers
204 views

measuring the effect of attending a private school on the return to education

In my research methods course project, I'm investigating the impact of attending a private school during primary and secondary education on future wages, utilizing cross-sectional data. I've ...
0 votes
1 answer
25 views

Regression Discontinuity Design Result

I am reading a paper on Voting Technology by Fujiwara (2015). He uses an RDD to estimate the causal effect. In his result tables, he mentions a stat named "Pre-treatment Mean", which I don't ...
0 votes
0 answers
16 views

Consequences of running a panel VAR with 2 variables stationary at levels and one variable stationary at first difference

I have a trivariate Panel VAR system with the following variables: LnGDP (Natural log of GDP) Fiscal Expenditure (as % of GDP) Interest rate ( in %) LnGDP and interest rate are stationary at levels ...
5 votes
2 answers
105 views

In VAR models, do variations in the variables come solely from shocks?

In DSGE models, if you shut all shocks to zero, then the variables have zero variations. Thus, they just equal their steady-state values for all periods. So the series for all variables are just flat ...
0 votes
0 answers
12 views

How does scaling/decomposition of data affect interpretability?

I have time series GDP growth rate data that I use as my Y and other X variables that I put into neural networks to make predictions. The two questions that I have are: When I decompose my GDP_growth ...
0 votes
0 answers
23 views

Multicollinearity with interaction term and fixed effects

I have the following regression including an interaction term and fixed effects ...
1 vote
0 answers
34 views

How to find hourly wage when data only provide range?

I am trying to separate observations into two groups, people who earn below (treatment group) and above (control group) the minimum wage to perform a difference-in-differences. The data I'm using have ...
2 votes
0 answers
31 views

What kind of econometric analysis can be used on Indian domestic petroleum sales 2008-2018? [closed]

I have data for sales of petroleum products across different states in India of both public sector and private sector companies for 10 years. Number of years: 2008 to 2018 monthly data (10 years) ...
0 votes
1 answer
87 views

Greene's Econometric Analysis (8th edition), Table 6.12, p.233

I tried, but without success so far, to reproduce Greenes' empirical results using his gasoline data available at: https://pages.stern.nyu.edu/~wgreene/Text/econometricanalysis.htm You will find the R-...
1 vote
2 answers
93 views

Including Controls for Relevance Test in First Stage Regression of IV?

I am conducting an instrumental variable approach (IV) in my paper, and I am puzzled how to correctly test for the relevance / strength of the instrument assumption. I recently read in a paper by ...
1 vote
1 answer
87 views

Unit root tests in panel data

I'm currently engaged in a panel data analysis project in R, focusing on multiple economic variables (such as GDP, Gross Fixed Capital Formation, etc.) for EU27 countries spanning the period 1995-2015....
1 vote
0 answers
21 views

Calculate consumers WTP for product attributes

I have a large panel on the city level of how many cars of each {model, fueltype} combination were newly registered in each year. This panel also includes a large variety of characteristics for each ...
1 vote
1 answer
84 views

Diagnostic tests on models using panel data

I am trying to replicate Islam(1995) Convergence model for EU countries. I know that LSDV estimator is biased,however i have applied it in order to compare the results with other methods. My question ...
0 votes
0 answers
20 views

Suppose that you estimate the above model with the first difference estimation procedure in R. Will your estimator be consistent? Why?

$log(invest_{it})=\theta_t+z_{it}\gamma+\delta_1tax_{it}+\delta_2disaster_{it}+c_i+u_{it}$ is the model. And what about fixed effect and random effect? I went through the book and it gives the ...
1 vote
1 answer
43 views

What does it mean to "replace all variables with the residuals after projections on any additional exogenous regressors"

I am conducting IV Regression and to make sure that my instrument is not weak, I want to use Montiel Olea & Pflueger (2013) robustness test. (see: Paper by Montiel Olea & Plueger (2013) ). To ...
0 votes
0 answers
24 views

Regression discontinuity design

I have this setting: Where V is the running variable and M=1 if V>0. It is a sharp RDD. D is a set of period dummies and $\tau$ is the calendar year. Coefficients in vector $\beta$ capture the ...
1 vote
1 answer
188 views

Conditional Convergence

Lets assume that we have a theoretical model in this specification to test conditional convergence: \begin{equation} \frac{1}{T} \ln\left(\frac{y_{it}}{y_{it-1}}\right) = a - (1 - e^{-\beta T})\ln(y_{...
1 vote
0 answers
25 views

"On the causes and consequences of deviations from rational behaviour"

The title of this post is the title of a paper I am drawing inspiration from for my final year dissertation. If anyone has the time, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3623676, this ...
8 votes
3 answers
18k views

What does it mean to make an identification assumption?

Trying to understand this problem: Suppose you had access to a dataset that follows individuals from adolescence throughout adulthood. Each year, you observe earnings, educational attainment, ...
1 vote
2 answers
318 views

Absolute Convergence

I have noticed that some researchers in order to test convergence hypothesis apply a model in this form: $(1/T) \ln(y_{it}/y_{i,t-1}) = b_0 - b_1\ln(y_{i,t-1}) + u_{it} $ (Barro & Sala-I-Martin, ...
0 votes
0 answers
31 views

Ordered Logit Model: Marginal Effects Signs Opposite

I'm deeply stuck in an issue in my research paper's methodology. I'm getting the following disparate results for my marginal effects. In my Ordered Logit model, I have Y = Trust in banks (4-Max trust,...
10 votes
4 answers
1k views

Estimating CES utility (not production) function parameters

The CES utility function has the form \begin{equation} u(x_1,\dots,x_n)=\left[\sum_{i=1}^n\alpha_ix_i^\rho\right]^{1/\rho}, \end{equation} where $\alpha_i$ is the consumption share parameter and $\...
0 votes
0 answers
23 views

Assessing stochastic dominance from samples? ...and is Kruskal-Wallis useful?

According to wikipedia and other scattered software documentation Kruskal Wallis tests assess "stochastic dominance". But the original paper doesn't mention "dominance". Nor does ...
1 vote
1 answer
32 views

primary impact on real estate prices/taxes

Are my housing prices/taxes more influenced by the $40M beach house a few miles away from my home or those in the lower-class well beyond my county line? Assuming a few basics: there are differing ...
3 votes
1 answer
287 views

Log Transformation of Zeros (Slave Trade Data)

I am trying to log transform data on slave trade voyages from the Database by David Eltis,The Trans-Atlantic Slave Trade Database. The Problem I am facing: Many values are 0. My first idea was to ...
0 votes
0 answers
48 views

How to run Panel data analysis when data on the dependent variable is on a 5 year interval basis and that on independent variable is on yearly basis?

I am reading a paper which empirically tests if primary exports affect education attainment in LAC countries over the period 1965 to 2010. It uses percentage of secondary school enrollment as ...
1 vote
1 answer
53 views

Log of 0 Probelm in Acemoglu et al. 2002b

in Acemoglu et. al. 2002b, which is about European Growth and Atlantic Trade, they do a log transformation of the atlantic trade variable. Since there are many observations where trade is 0, they say ...
1 vote
0 answers
17 views

Difference between Quantile Regression and Endogenous Stratification

I have a question that stems from an ongoing experiment I'm conducting, focusing on treatment heterogeneity. Initially, my approach involved considering a beyond-mean analysis utilizing quantile ...
1 vote
1 answer
21 views

Considering employment when estimating treatment effect on wage RCT

Suppose I run a RCT where the treatment is educating high school students. Outcome variable of interest $y$ is the wage the student will earn after graduating from high school. Suppose there is no non-...
3 votes
2 answers
254 views

Solving stochastic difference equation in New Keynesian model (FTPL textbook derivation)

In Cochrane's "Fiscal Theory of the Price Level", I am struggling with the following derivation. Take the first line as given, where $\pi_t$ and $i_t$ are random processes adapted to $\...
3 votes
1 answer
531 views

How is potential experience usually measured in the Mincer equation?

Wikipedia specifies the Mincer equation like this: $$\ln w = \ln w_0 + \rho s + \beta_1 x + \beta_2 x^2$$ and states that $w$ is wage, $s$ is years of schooling and $x$ is potential experience. ...
1 vote
1 answer
66 views

Regression Discontinuity Design equation

Dear all, I found this equation to estimate a RDD in a paper. $(f_i-f_z)$ is the running variable, hence $\alpha$ should be the slope to the left of the cutoff and $\lambda$ the variation in the slope ...
3 votes
0 answers
23 views

Is it possible to run a regression discontinuity design (RDD) with different treatment intensities?

My question arises from an arbitrary assignment rule which gives monetary transfers to cities in Colombia with a population of less than 25,000 inhabitants. However, the transfer varies between cities ...
2 votes
1 answer
72 views

Panel data with Sector year fixed effects on R

I am trying to replicate the following econometric equation from the paper "How do french manufacturing firms react to Energy shocks ?" s denotes sectors,i denotes firms, and t denotes year....
2 votes
2 answers
352 views

How to correct selection bias in an econometric analysis?

We know that selection bias occurs when the treatment and control groups are not comparable, leading to differences in the outcome that are not solely due to the treatment. How does one address the ...
1 vote
1 answer
297 views

When should I NOT control for unit-fixed effects?

I see most of the applied econometrics papers using the two-way fixed effects model, controlling for time and units fixed effects, so: $$y_{it}=\alpha_{i}+ \gamma_{t} +\beta x_{it} +\epsilon_{it}$$ I ...

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