Questions tagged [econometrics]

Econometrics is the application of statistical methods to economic data for various purposes such as of testing hypotheses, infering causal relationships and forecasting future trends. Only use this tag for questions relating to the theoretical aspect of an econometric technique.

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Fixed effect model: different estimation approaches with R - how to demean variables - unbalanced panel

I want to use R to estimate a fixed effects model using different estimation approaches (e.g. replicating xtreg from Stata). Note that I am using an unbalanced panel. The easiest way to do this is ...
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Annihilator matrix transforming all variables in deviations from their sample means?

In my econometrics notes (not a proper textbook) I find that given a partitioning of the sample matrix X into $$ X =(X_1 1),$$ where 1 is the (nx1) vector of all unity elements, then $$M_{[1]}=I - 1(1'...
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Why is the internal rate of return decreasing while the profit per unit of real gross value added is increasing?

I made a graph based on data from the Penn World Table showing that the internal rate of return has been decreasing over time in the US and the rest of the G7 (even more if you exclude Germany, whose ...
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0 votes
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+50

Deriving ADF unit root test form for the time series with quadratic deterministic trend

I have the following time series process $y_t $ $$\Delta y_t = \delta + \gamma t + \epsilon_t$$ where $e_t$ is white noise process with the variance of $\sigma^2$. I guess that whereas $\Delta y_t$ is ...
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3 votes
1 answer
30 views

Derivation of sample variance of OLS estimator

Consider a Simple Linear Regression with the following assumptions: The dependent variable is related to the independent variable and the error term like: $y = \beta_0 + \beta _1 x + u$ We have a ...
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6 votes
1 answer
56 views

Measurement Error - Multivariate Case

I have a linear regression model, with usual assumptions holding; $E[xu] = 0$ and rank condition. $y_i = \alpha_0 + \alpha_1x_{1i} + \alpha_2x_{2i} + u_i$ I observe $\bar{x}_{2i}$, where: $\bar{x}...
2 votes
1 answer
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Why include start-of-period values in first difference estimation?

I am currently reading the Paper of Dippel et al. (2015), where the authors estimate the causal effect of imports on voting behavior in Germany. Therefore, they estimate the following first-difference ...
1 vote
0 answers
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How to read the results in this case?

From running the code for testing parallel trends, I perform the code below following the suggestion of xtdidregression guideline, page 15. estat ptrends And I got ...
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Application of Maximum Likelihood estimation (MLE) to the Generalized Least Square (GLS) model

I have the following regression $$y = X\beta +u$$ where $y$ and $u$ are $(n\times 1)$ and $X$ is a fixed $(n \times k)$ matrix with full column rank and $\beta$ is an unknown $(k\times 1)$ vector of ...
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0 votes
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Showing the unbiased estimator of variance for GLS estimator

I have the following regression $$y = X\beta +u$$ where $y$ and $u$ are $(n\times 1)$ and $X$ is a fixed $(n \times k)$ matrix with full column rank and $\beta$ is an unknown $(k\times 1)$ vector of ...
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-1 votes
1 answer
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Do Economists use Newey-West/Robust Standard Errors with GLS or GLM?

My hypothesis and I have not done any proofs, but I think Newey-West with GLS would have better estimation than OLS with Newey-West.
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1 answer
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OLS with multiple indicator variables

My dataset contains two numerical variables (n1, n2) and six indicator variables. The first three indicator variables specify ...
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1 answer
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Whether we should control for country-level control variables for studying one specific country?

In an international setting, when I examine the impact of laws on firms (the laws were implemented by many countries, I need to control for country-level control variables. However, I am wondering ...
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3 votes
2 answers
233 views

Unbiasedness and OLS Regression

I understand that we say that an estimator is unbiased if its expected value is equal to the population parameter it targets (i.e. if $\bar X _N $ is an estimator of the mean over a sample of size $N$,...
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0 votes
1 answer
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Is there a measure of social inequality?

A measure of economic inequality in a population is the gini coefficient. Is there such a measure of social inequality as well? The social rights include labor market, the source of income, health ...
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2 votes
1 answer
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How is the standard error of the discontinuity calculated when using local regression in a discontinuous regression?

In a typical regression discontinuity design, the standard error of the discontinuity is $se(\beta_2)$ in the following model: $$Y = \beta_0 + \beta_1 X_1 + \beta_2 D + \beta_3 (D X_1) + U$$ However, ...
2 votes
1 answer
14 views

Synthetic control method when treatment has an overflow effect on control group

Can I use a synthetic control method in the following settings: Treatment on one aggregate unit causes some of the individuals in that aggregate unit to migrate to the control unit The individuals in ...
1 vote
1 answer
42 views

Is my instrument too noisy?

I have an instrument, that I want to use with IV 2SLS, to predict my endogenous variable. The scatter plot of my instrument against my endogenous variable looks like this. Using Stata's binscatter, I ...
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5 votes
0 answers
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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 ...
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4 votes
1 answer
32 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 ...
1 vote
0 answers
7 views

Can I perform magnitude analysis on margins?

I’m trying to find if there’s an asymmetric in my dummy variables. So after creating my regression I am looking at margins with all the variables held constant with the dummy=1,0.5 ( a pseudo result I ...
2 votes
1 answer
236 views

Expected value inside a utility function

Lets say Agent 1 has a utility function that depends on the other person, i.e., $u_1(x_1-x_2)$, where $x_i$ is the choice of Agent $i$. Suppose the expected value of $x_2$ is denoted $E[x_2]$. Can $...
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1 vote
1 answer
32 views

IV - Is this correct?

I have the following question. Currently I have an econometric model that uses an instrumental variable, particularly a Bartik instrument (which some people call shift-share). I'm proceding as Mayda ...
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0 votes
0 answers
10 views

ANOVA analysis with R software

I would like to perform the ANOVA analysis for the variable adjusted yield "adyield" (it is the mean adjusted yield for a sorghum variety over 3 years i.e., 2017, 2018 and 2020) to see ...
0 votes
0 answers
13 views

Error ' only 0's may be mixed with negative subscripts' in the pgmm function

I am working with panel data analysis and I am having a problem with the pgmm function, when I run it, it returns this error: ...
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1 vote
0 answers
20 views

conleyreg() for panel data

With panel data, how does conleyreg() correct for spatial correlation and autocorrelation within units over time? More specifically, why do my standard errors change when I specify 'unit' and 'time' ...
2 votes
0 answers
37 views

Is autocorrelation and the number of clusters related in an ergodic process

I' ve come across two notions for the condition of (mean-) ergodicity and wonder whether and how they relate. (1) Let $ {X}_{t \ge 0} $ be a second order stationary process with (constant) mean $\mu$ ...
1 vote
0 answers
13 views

Clustering Degrees of Freedom Correction

In a regression model estimated with $n$ observations, $$y_i = \beta_0 +\beta_1 x_{1i}+...+\beta_k x_{ki} +u_i$$ the baseline degrees of freedom adjustment when calculating standard errors is to ...
0 votes
0 answers
4 views

If the estimate and the a priori expected signs and magnitudes of one of the coefficients disagree. What is the result?

If the estimate and the a priori expected signs and magnitudes of one of the coefficients disagree. What is the result?strong text
5 votes
1 answer
51 views

Is program evaluation (DiD, RD) a structural estimation?

Consider program evaluation methods such as IV, Diff-in-Diff, and RD. According to Haile (2021): "Typically program evaluation requires more than descriptive analysis: one must counterfactually ...
3 votes
2 answers
144 views

Normalizing for Population in Regression

I am currently interested in looking at the relationship between the number of universities in a state and an economic index by state. It occurs to me though that the number of colleges in a state may ...
0 votes
0 answers
9 views

How to handle Free Zones in international trade data?

I have a import trade data of country "A". This trade data includes some categories : National Trade Free zones Other The data collection method is unknown to me, so I don't know if Free ...
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0 votes
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Using the 80:20 rule, what top 20% of economic concepts, theories, methods, tests, tools etc do you use to generate 80% of your results?

I'm curious to see what different economists use in their roles. Helpful if you could specify your area of work/interest too.
1 vote
1 answer
63 views

Diff-in-diff parallel trends with a positive outcome

I am trying to test for parallel trends when using diff-in-diffs, where my outcome variable is nonnegative (basically a percentage -- the share of subjects with some property). I run into a simple-...
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0 votes
0 answers
30 views

Hemi-continuity of demand and supply correspondence

Suppose a scenario in which the production set of each firm is compact and convex. How can we prove that each firm's profit function is continuous and supply correspondence can be proved to be upper ...
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1 vote
1 answer
51 views

Can I instrument an endogenous variable and its quadratic form with the instrument and its quadratic form?

I have the following problem, where I would like to have an advise or a reference: I'm estimating a model which usually (in other papers) only includes the explanatory variable in its linear form, but,...
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-3 votes
1 answer
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How to interpret the significance of estimates if it differs between regression models? [duplicate]

I am trying to analyse the impact of experiencing a certain incident on the pro-unification opinion of people. If the incident occurs, they can occur in solely 3 different types: A, B and C. We assume ...
2 votes
1 answer
46 views

How to estimate $\gamma$ in the following model?

Suppose I have the following model: $Q=1(x'\beta+e>0)$, $D=1(x'\alpha+\gamma Q+u>0)$ and I want to estimate $\gamma$, the error terms $e,u$ are jointly normal. If $e$ and $u$ are correlated, can ...
0 votes
0 answers
19 views

How do I interpret the adjustment mechanism of the two variables with respect to the disequilibrium in this VEC model?

How do I interpret the adjustment mechanism of the two variables with respect to the disequilibrium without running any test and just by looking at the coefficients?
0 votes
0 answers
19 views

How can I say if a variable Granger-causes another variable in a VEC model?

If I have a VEC model output with coefficients and associated standard errors, how I can say if a variable Granger-causes another one by just looking at the output and without any test?
1 vote
3 answers
77 views

Expected variance with stochastic volatility

I am a bit puzzled with this problem. I am unsure how to rigorously write the result. I appreciate your help. if $e_t\sim \mathcal{N}(0,\,\sigma_{e,t}^{2})$ and $\sigma_{e,t}^{2}= \sigma_{e,t-1}^{2}+...
0 votes
1 answer
30 views

Iterated Expectations problem

Is this procedure correct? $$E[y_{t-1}\epsilon_t]$$ $$= E[E[y_{t-1}\epsilon_t|y_{t-1}]]$$ $$=E[y_{t-1}E[\epsilon_t|y_{t-1}]]$$
1 vote
1 answer
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Is the exogeneity condition required for GLS with panel data a form of strict exogeneity?

Consider the following regression model using panel data: $$y_{it}=x_{it} + u_{it}$$ According to Wooldridge (2010), Chapter 7.4, the first assumption required for Generalized Least Squares (GLS) in a ...
0 votes
0 answers
12 views

papers with monthly or weekly firm-level data

Hello everyone I need to find some recent papers that use monthly or weekly firm-level data. The constraint is that the papers come from any of the following journals: the journal of finance review ...
1 vote
1 answer
46 views

Value added at current price and deflation

I am currently working with Value Added at current price per industry per country per year (VALU variable available on OECD stats) and I'm trying to use the Value Added for all the European Countries (...
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1 vote
1 answer
59 views

Slope in Probit results

In Greene, Econometric Analysis, the following table is shown from a probit regression: I am trying to reproduce these results. (That is my preferred way to get a better understanding of this). My ...
0 votes
0 answers
12 views

Is it possible to find missing indices using just a given indices data of some year? The question seem confusing. Try this!

I have been grappling with this question, and I think there is some missing parameter, I would deeply appreciate it if just anyone can wrap their heads around this. Thanks in advance. Index numbers ...
3 votes
1 answer
73 views

Econometrics - Kernel Bandwidth Formula

When using a Gaussian kernel to estimate the distribution of a Gaussian-distributed $x$, the bandwidth that minimizes the mean integrated squared error is: $$h=\left(\frac{4 \hat{\sigma}^5}{3n}\right)^...
1 vote
1 answer
68 views

How to define treatment & control groups properly?

I’m working on a project examining the effect of a 2016 cash transfer on fertility. Who is eligible for the cash? All families with: 2+ children, or 1 low-income or disabled child. The data doesn’t ...
2 votes
1 answer
34 views

Difference-in-difference robust to heterogeneous treatment effect - Gendron-Carrier et al. specification

I am trying to extend the results of Gendron-Carrier et al. (2022) article published in the American Economic Journal : Applied Economics which is about the effect of subway opening on pollution. I ...

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