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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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18 votes
2 answers
609 views

How accurate is duality?

In economic theory we know that with the use of some calculus, Hotellings Lemma and Sheppards lemma we can derive a given firms supply function and in term its Profit function. With data of a given ...
EconJohn's user avatar
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15 votes
2 answers
2k views

How much do second-hand good purchases affect first-hand demand?

For the purpose of this question, I'm only interested in relatively cheap goods (clothing, appliances, furniture, phones), not extremely substantial purchases like cars or houses. Proceeding from ...
H Huang's user avatar
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12 votes
4 answers
1k views

What are some good repositories for economic data

Economic data is a very broad concept. It can include discrete preference relation data-sets as well as extensive time series data. But it is important that theories are tested against data, and the ...
11 votes
2 answers
7k views

Difference-in-differences in 2SLS regression

Usually when we do a difference-in-differences estimation, we do it in a OLS reduced form as follows: $$ Y_{it}=\alpha After_t+\gamma Treatment_i+\delta After*Treatment_{i,t}+X_{it}\beta+\epsilon_{i,...
Wright's user avatar
  • 113
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 $\...
Herr K.'s user avatar
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8 votes
3 answers
1k views

Citing non-economics studies in an economics research paper

I am currently working on a paper in economics that has some dimensions that discuss women's social value. As is the case in developing countries a lot of economic studies do not exist whereas there ...
Lorien's user avatar
  • 103
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, ...
user avatar
8 votes
3 answers
6k views

Identifying assumption meaning

I am hoping to get a good explanation regarding what is meant by an identifying assumption. In many articles, under empirical strategy, authors state that: we exploit firm level variation to identify ...
user508281's user avatar
8 votes
1 answer
5k views

How should one determine the proper number of lags in a time series regression?

I am using time series data in economic model estimation. I want determine proper lag for Error Correcting Model (ECM) model for example. I can check AIC, SC and HQ criterion for determine proper lag. ...
Huseyin's user avatar
  • 743
8 votes
2 answers
11k views

Why does slowly decaying ACF indicate that a time series is non-stationary?

I am a student studying time series econometric online and looking for help talking around some of the principles. There is one point I am trying to understand better. I've come across some ...
Adrian_P's user avatar
  • 157
7 votes
2 answers
432 views

Cobb-Douglas production function with expenditures rather than units

I want to estimate a standard Cobb-Douglas production function of the form $ Y=AK^{\alpha}L^{\beta}$. However, I only have data on labour expenditures, not units of labour. I don't have data on the ...
leecarvallo's user avatar
7 votes
1 answer
613 views

Is there empirical evidence on usability of Cobb-Douglas production function?

I am trying to estimate a simple Cobb-Douglas production function $Y=AL^{\alpha}K^{\beta}$ on US data and get an unrealistic estimate of $\alpha$ and a high p-value for $\beta$. Structure of ...
Petr's user avatar
  • 73
7 votes
2 answers
160 views

Using another person's guess as an IV

In Estimates of the Economic Return to Schooling from a New Sample of Twins by Orley Ashenfelter and Alan Krueger, they correct sampling error with an IV. They claim that their results imply a larger ...
user avatar
7 votes
1 answer
454 views

Replicate Blundell and Bond (2000) results using R

I want to replicate Blundell and Bond (2000) Table III in R. I'm using the function pgmm from package plm, which (apparently) ...
antifrax's user avatar
  • 101
6 votes
3 answers
212 views

Derivation of index decomposition analysis

I’m currently reading a paper on index decomposition. The paper is here for reference : https://www.sciencedirect.com/science/article/pii/S0140988315001772 The paper is setting out how it has gone ...
hmmmm's user avatar
  • 366
6 votes
2 answers
197 views

Are there conventions in economics for coding the distance between states?

I know there are lots of gravity models in economics that take as an input distance between countries. My understanding is distance is typically coded based on the distance between capital cities, ...
BKay's user avatar
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6 votes
1 answer
582 views

Omitted variables in gravity model

I'm trying to construct a gravity model for EU trade flows using a panel dataset, but am suffering from what appears to be a persistent omitted variable problem. My residuals display a queer log-like, ...
Robert Brown's user avatar
6 votes
1 answer
395 views

How to evaluate whether the synthetic control is good enough

I'm using the synthetic control method to evaluate a state-level policy (using synth package in Stata). I've read the seminal ADH papers on CA tobacco & Germany reunification, but I still don't ...
deeyuan's user avatar
  • 63
6 votes
1 answer
70 views

What type of graph can be hepful to explain the type of errors that should be used?

I have a regression of wage on several variables, such as education, marriage and so on. I want to explain that it would be a better idea to use cluster errors, since we expect the wage to be ...
Carlos N's user avatar
  • 125
6 votes
1 answer
763 views

Errata for Wooldridge graduate econometrics book

Does anyone know where I can find an errata to the 2nd edition (2010) of «Econometric Analysis of Cross-Section and Panel Data» by Wooldridge? I've tried the accompanying website, but I could not find ...
An old man in the sea.'s user avatar
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 ...
Emmanuel Ameyaw's user avatar
5 votes
2 answers
2k views

How do we estimate production functions?

In a standard economics education we learn about production functions, indicating an output as a function of a given input of capital and labour. An average model looks like this: (1) $F(L,K)=L^{...
EconJohn's user avatar
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5 votes
1 answer
10k views

What are the main differences among xtreg, areg, reghdfe?

Normally, when I run regressions for panel data in Stata using these three commands (xtreg,areg, ...
Phil Nguyen's user avatar
  • 1,160
5 votes
1 answer
277 views

Is a hedonic regression a reduced-form?

If house prices are a function of location, physical characteristics and an error term i.e. house_price = f (location, physical, e) And I estimate a regression with the log of house price as my ...
Kelly's user avatar
  • 329
5 votes
2 answers
1k views

Dealing with Missing Data when Testing the CAPM

Question How should I deal with missing data when trying to test the CAPM? Specifically, there are some stocks that are newly listed and/or delisted at any time. I don't want to exclude assets for ...
jmbejara's user avatar
  • 9,355
5 votes
2 answers
210 views

Research at the county-level: Macro or Micro?

Is research at the county-level considered applied micro or applied micro? The standard undergrad definitions ("micro" = "individual", "macro" = "nation") are of no help with units of measurement ...
user152810's user avatar
5 votes
1 answer
442 views

Why does synthetic control not suffer from backdoor confounders?

From Scott Cunningham in Mixtape, on propensity score matching: propensity score matching has not seen as wide adoption among economists as in other non-experimental methods like regression ...
Daycent's user avatar
  • 260
5 votes
1 answer
79 views

IV Regression with More Observations for First Stage than Second Stage

This is a very basic question, but I need help. Imagine I have a dataset for variables y, x, and z. I am running an instrumental variable regression such that y is my main outcome variable. So I am ...
Student in need's user avatar
5 votes
1 answer
197 views

Variance Decomposition of Wage Equation

I am reading two recent papers studying between-firm and within-firm wage inequality, Barth et al 2016 (hereafter BBDF) and Song et al 2019 (hereafter SPGBV). I am confused by the different variance ...
Alalalalaki's user avatar
  • 2,419
5 votes
1 answer
156 views

Insignificant Interaction effect in applied econometrics (multinomial logit regression)

I'm currently writing my master's thesis where I'm applying a multinomial logit regression with interactions effect. The model I'm using is $$ P(y=j) = exp(xb_j)/(1+∑exp(xb_h)) $$ where $$ xb_j =...
user2012's user avatar
5 votes
2 answers
982 views

Problems with Representative Sampling

I am curious: what exactly are the problems caused by using representative sampling rather than random sampling whenever creating a subsample of large dataset for nonexperimental analysis. Further, ...
123's user avatar
  • 2,911
5 votes
0 answers
75 views

p-hacking vs. parameter calibration?

I'm currently tasked in my job to design a Prospect Theory (here CPT-)index as mentioned in Barberis, Mukherjee and Wang (2016): "Prospect Theory and Stock Returns: An Empirical Test", see ...
T123's user avatar
  • 303
4 votes
2 answers
972 views

Why we need at least 40 groups to be properly clustered?

From this discussion, I deem that we need approximately 40 groups for clustering. For example, if we want to clustered by industry, we need at least 40 industries, or if we want to cluster by year, we ...
Phil Nguyen's user avatar
  • 1,160
4 votes
1 answer
453 views

The Econometrics of the Stone Geary Production function

The Stone-Gerry production function generally takes a form of: $$f(x_{i})=\prod_{i=1}^n(x_{i}-a_{i})^{\gamma_i}$$ where $x_i$ represents all inputs in the model, $a_i$ is a constant representing the ...
EconJohn's user avatar
  • 8,407
4 votes
1 answer
9k views

How to interpret "scale efficiency" in DEA?

I am reading the book Benchmarking with DEA, SFA, and R by Bogetoft and Otto. In Section 4.8 they discuss the concept of scale efficiency, and I am having trouble interpreting this concept. The ...
mkreisel's user avatar
  • 151
4 votes
1 answer
210 views

Choice between dummy variables and Likert scale in Linear Regression

I want to run a linear regression based on the data gathered using a questionnaire. Several of the questions have the following form: How much do you spend on xyz in a month? a. Less than \$50 b. \$50 ...
Ishan Kashyap Hazarika's user avatar
4 votes
1 answer
2k views

To use seasonally adjusted data or not seasonally adjust data?

Im currently doing research using some macroeconomic data. I just want to know what are the pros and cons of using seasonally adjusted/non-seasonally adjusted data in terms of forecasting.
EconJohn's user avatar
  • 8,407
4 votes
2 answers
657 views

Bayesian vs. Frequentist Approach

I hope this question is not too general in nature; I just wanted to ask the members of this community their opinion on the following question: How can one choose between the Bayesian approach and the ...
ChinG's user avatar
  • 1,633
4 votes
1 answer
56 views

Resampling for a Probabilistic Model to Balance Outcomes

I wanted to construct a logit model for determining the probability a recession will be determined for any given month using the usual Macro indicators; however, I noticed that 90% of the months in my ...
Forgot the Jacobian's user avatar
4 votes
1 answer
99 views

How to deal with multiplicatively constant and additively constant fixed effects?

From Nick Huntington-Klein, The Effect: Fixed effects is a method of controlling for all variables, whether they’re observed or not, as long as they stay constant within some larger category. How can ...
Daycent's user avatar
  • 260
4 votes
1 answer
120 views

Demand function estimation

The model specification is: $$D_{ij} = A + aP_{ij} + bY_{ij} + cN_{ij} + e_{ij}$$ where: $i, j$ = $i$-th year, $j$-th month, $D$= demand (outgoing minutes) $P$ = average price of call, $Y$ = ...
Quirik's user avatar
  • 281
4 votes
2 answers
218 views

Applied financial econometrics textbook

I am looking for an applied financial econometrics textbook. There are plenty of textbooks that present time series models used in financial econometrics but few of them put any emphasis on ...
Richard Hardy's user avatar
4 votes
1 answer
206 views

Why N>T is required on system GMM estimations?

My question is why N>T is required when working with dynamic panel estimations based on system GMM, such as xtdpdsys at stata. Is that based on the potential lost of information due to orthogonal ...
RLF's user avatar
  • 41
4 votes
1 answer
113 views

The Household Production Function

I was wondering whether someone can explain the household production function (HPF). Specifically, the variant presented in Patanayak et al (2005). The paper uses the HPF to determine household ...
June's user avatar
  • 41
4 votes
1 answer
61 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).
Martin's user avatar
  • 53
4 votes
1 answer
95 views

Controlling for interaction effects

In a recent paper, Edelman et al. examine (amongst other things) how discrimination on AirBnB varies with the characteristics of hosts. First, they conduct a field experiment which involves sending a ...
user avatar
4 votes
0 answers
50 views

comparison of micro production functions

There are many different production function estimation methods, relevant for micro and firm data. For example Olley-Pakes, Levinsohn-Petrin, Ackerberg et al., Wooldridge etc. But does anyone know of ...
cel's user avatar
  • 41
4 votes
0 answers
83 views

How to econometrically identify perfect complements in production?

The production $$f(x_i,...,x_n)=\min\{x_i,...,x_n\}$$ is pretty straight forward and usually with smaller size data sets and can usually be picked up on rather quickly in an intuitive sense. ...
EconJohn's user avatar
  • 8,407
4 votes
0 answers
80 views

R reproducible example, restrictions on cointegrating equations

The code given below estimates a VEC model with 4 cointegrating vectors. It is a reproducible code, so just copy and paste into your R console (or script editor). ...
london's user avatar
  • 2,010
3 votes
2 answers
159 views

From conceptual framework to econometric estimation

When I run the following regression, I find that $\beta>0$ $$ y_i=\beta D_i+\varepsilon_i$$ To explain the finding, I wrote down a conceptual framework and I obtained the following prediction $$\...
hbkn's user avatar
  • 165

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