Questions tagged [applied-econometrics]

Use this tag to discuss empirical papers and issues arising when applying theoretical models to data.

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2
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1answer
209 views

How does one deal with trending variables in Linear Regression?

I have a linear regression model with two independent variables that takes the form: $$y_{it} = \beta_{0} + \beta_{1}x_{it} + \beta_{2}z_{it} + u_{it}$$ where $u_{it}$ is the error structure. I want ...
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0answers
22 views

Cointegration but no Granger causality

Suppose I have two variables - $y_t$ and $x_t$ - which are cointegrated. I believe that (i) $y_t$ responds to deviations from the long-run equilibrium, (ii) the long-run elasticity of $y_t$ with ...
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1answer
17 views

Annual Fraud Recovery Over Time: Should I adjust for inflation?

I have a dataset of the total amount the U.S. Department of Justice obtained annually in settlements/judgments of government fraud cases from fiscal years 1988-2019. There's a lot of variation, but ...
2
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1answer
73 views

Panel econometrics for marketing mix analysis: how to include spending that affects all the individuals of a panel?

Dear stack exchangers, in the course of an internship at a microfinance bank in Tajikistan, I have been tasked with assessing the efficiency of different marketing expenses. I will try to expose the ...
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0answers
11 views

Where to find a list of U.S. policy changes for causal studies?

I'm currently trying to figure how the topic of my paper, which is supposed to be related to policy evaluation (causal inference). I thought it would be great if I could first obtain a list of recent ...
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2answers
24 views

Can you take the moving average of quarterly data of an explanatory variable in a regression to smoothen noise and get more accurate coefficients?

I'm trying to use acceleration of quarterly data on household debt (the difference in the difference in debt) in a regression on unemployment (only concerned with correlation) but quarterly data is ...
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2answers
90 views

How to estimate loss of customers due to customer support inefficiency?

I have a data about customers and their activity on a website for a two-year period. Also, I have a customer support work evaluation data for a shorter period of that two-year period. The question is: ...
4
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1answer
88 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 =...
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1answer
56 views

Questions about the future of macroeconomic modeling and the role of simultaneous equation systems

I started to study about macroeconomic modeling and I am interested in the following questions. I understand that there are no definite answers to these questions. But I am interested in the opinion ...
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2answers
305 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^{...
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1answer
99 views

What is an unconditional model for a time series variable?

If I am being asked to do an unconditional analysis of a time series variable, lets say GDP starting in 2000, what model am I supposed to estimate?
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1answer
38 views

Building a time-series demand forecasting model

I am forecasting demand for certain types of goods and services, which I expect to be correlated to a sub-set of a basket of macroeconomic indicators (considering 15-20 indicators) I do not know ...
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0answers
7 views

Evaluating the impact of US federal grants

There are a number of challenges with evaluating the impact/effectiveness of federal grants in the U.S. In particular, it's easy to obtain a (somewhat comprehensive) record of transactions between ...
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2answers
4k 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,...
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1answer
34 views

Why are the same set of controls used for both OLS and 2SLS?

I have been reading several papers that use 2SLS. These papers usually also show the OLS regression results. I noticed that when authors report results for 2SLS, they also include control variables ...
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0answers
20 views

A question about independence of LATE framework (IV)

I came across the assumption of independence of the LATE in 2SLS: My first reaction is, why D1i and D0i are independent of the instrument Zi? Shouldn't the treatment and IV be correlated for the IV ...
1
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1answer
26 views

Negative correlation conditional variance and return

I've estimated a GARCH for S&P 500, Nikkei and DAX index. The model for the return of S&P 500, the results indicate the return of DAX has an negative effect on the S&P 500 conditional ...
1
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1answer
36 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 ...
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0answers
8 views

Is there a specific test for this procedure? (NKPC and coefficient stability)

I'm running a GMM regression in order to estimate a New Keynesian Phillips Curve, with forecasting purpose, and i want to know if there is a testing procedure for the following problem: (i) First i ...
0
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1answer
75 views

Econometrics: why the i.i.d assumption and weak exogeneity assumption imply strict exogeneity?

The proposition is from lecture notes of advanced econometrics of Yongmiao Hong: A1: $\{Y_t,X_t'\}_{t=1}^n$ is an i.i.d. random sample. A2: $E(\varepsilon_t|X_t)=0$ almost surely with $E(\...
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0answers
39 views

Interpretation of coefficients in ECM for consumption

Say that we are regressing consumption $C_t$ on time $Y_t$. Furthermore, suppose that both series are $I(1)$ and are co-integrated. Given this, we set up the error correction model (ECM) as follows: $...
2
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1answer
42 views

The Household Production Function

I was wondering whether someone can explain the household production function. Specifically, the variant presented in Patanayak et al 2005. The paper uses the HPF to determine household willingness to ...
6
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1answer
130 views

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

This is my first question at Stack Exchange. I am trying to estimate simple Cobb-Douglas production function $Y=AL^{\alpha}K^{\beta}$ on US data and receive an unrealistic estimate of $\alpha$ and a ...
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0answers
196 views

Dynamic factor model for inflation (UIG)

I'm trying to replicate some results of Fed Underlying Inflation Gauge (UIG) model, which is a dynamic factor model to capture inflation trend. https://www.newyorkfed.org/research/policy/underlying-...
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21 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 ...
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0answers
17 views

What are the statistical tests I need to perform before I regress GDP on multiple variables?

I'm using data over 10 countries for the period 1975 to 2010. My objective is to check if the chosen regressors have significant effect on GDP. I have very basic knowledge of econometrics which I ...
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2answers
31 views

what can be the proxy variable for measure of product innovation?

My objective is to prove that international trade leads human capital formation which leads to economic growth. I am regressing GDP on multiple variables among which Human capital is one. According to ...
2
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1answer
30 views

Is measurement error in self-reported health a problem in this scenario…?

I am running regressions to estimate the impact of health conditions on life satisfaction. I have read a paper that showed that there is likely to be measurement error in the self-reported health ...
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0answers
19 views

Performing good forecasts for the GDP

What forecasting models would you recommend to forecast the GDP? Through a quick research I have found that VEC, VAR, SVAR models are the most common. Are they though good forecasters? Or are they ...
3
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1answer
102 views

Why can't we control for squares and quadratics of predicted values in regression?

If my goal were prediction (e.g. of propensity scores), why couldn't I control for higher order terms of the model equation? For example, why not estimate the model and then control for squares and ...
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0answers
15 views

treatment of non-consecutive periods in panel and ʀ SFA

ɪ am estimating a Stochastic Frontier Analysis (SFA estimated by MʟE) model for a panel of seven periods. ɪ want to know if ɪ can use all the periods in the estimation procedure and how are they ...
6
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2answers
307 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 ...
1
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1answer
58 views

What is the interpration of results if adding or subtracting a control variable effects the significance of explanotary variables?

I am conducting some regressions on economic growth determinants and I am disillusioned. Essentially by choosing what groups of variable to regress I can get the desired significance. What does this ...
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0answers
637 views

Difference between multinomial logit and conditional logit

I'm trying to decide whether to run a multinomial logit or a conditonal logit (McFadden, 1973). I have data from a choice-based conjoint study in which each of the respondent's choices was between a ...
2
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0answers
30 views

Regression analysis with interaction and decomposed main effect

I'm trying to figure out if I need to include the main effect in a regression analysis with an interaction if I am already including a decomposed version of the main effect. For example, let: ...
2
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0answers
40 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
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1answer
40 views

is there a difference between E[e|x]=0 and E[e|d=1]-E[e|d=0] in continuous vs discrete case in regressions?

in the discrete case, if assignemt is random, then i can express E[y|d=1]-E[y|d=0] = B + E[e|d=1]-E[e|d=0], where the expectation of the errors are the same for both groups and become zero. Where I am ...
5
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3answers
12k 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, ...
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0answers
30 views

Should I include lags in an LLC unit root test?

I have panel data (N = 10, T = 20), which I intend to run a series of regressions on. I first want to see if my data are stationary in levels or in differences. To do this, I have been performing ...
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0answers
15 views

Engel’s Coefficient Data

Does anyone know of any good data sources where we can find Engel’s Coefficients by nation?
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2answers
80 views

Why hasn't the huge increase in supply provided by Airbnb decreased prices?

Simple supply and demand economics would suggest that the huge increase in the supply of rooms to rent by Airbnb should have reduced the price of rental significantly in those cities where Airbnb is ...
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0answers
25 views

Econometrics: Is it feasible to use the “effect of the treatment” estimations from a diff-in-diff as dependent variable?

Basically I have many treated units and I would like to estimate (by applying the Diff-in-Diff methodology) the effect of the treatment. In my particular case it's very likely to observe certain ...
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0answers
31 views

Vector Autoregressions

Suppose running a VAR system featuring the central bank interest rate, inflation and GDP. Start by estimating each equation by OLS. How should you interpret the OLS residuals to these equations? My ...
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0answers
21 views

Mankiw, Romer & Weil: Estimating Implied Alpha & Beta

I am replicating Mankiw, Romer & Weil (1992) with data from 1995 through 2015, and I wondering how they estimated the implied alpha and beta. Thank you, For those curious, the paper can be found....
3
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1answer
679 views

What is a good proxy for government quality?

Is it ok to use corruption as a proxy for government quality?
-1
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1answer
51 views

When using OLS is it always necessary to drop the weak and insignificant variable? [closed]

Some of my variable shows weak collinear relationship on my dependent variable.. how should I address this?
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0answers
24 views

VAR model OLS line by line

I am estimating a VAR model line by line. Lets say the conditional variances are correlated. We would expect size distortion. So we would use another method, perhaps a HAC standard error to account ...
2
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0answers
32 views

How to control for population in Difference-in-Difference?

Random example, but let's say I'm examining the effect of a health program on influenza cases in India. They just randomly start the program in 7 of the 29 states. I have data on the number of flu ...
3
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1answer
57 views

When first differences contradict a regular regression regarding Investment vs Output relationship

Im doing some research with some panel data I have on firm output and investment. I ran two equations. $$y=\beta_0+\beta_1x+\beta_2x^2+\mu$$ $$\Delta y=\alpha_0+\Delta\alpha_1x+\epsilon$$ in R ...
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0answers
31 views

How should I rebase my GDP?

I have a constant GDP data from 1988 to 2009 in constant 1985 prices and GDP data from 2009 to 2017 in constant 2000 prices. My question is how should I rebase my GDP? Upon searching the web, i don'...