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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41
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1answer
26k views

What is structural estimation compared to reduced form estimation?

I've heard a lot of definitions given for structural estimation. But it's never seemed entirely clear to me. Some times I've heard that what one person might call "reduced form" estimation should ...
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5answers
4k views

Econometrics: Is elasticity meaningful in my, or any, regression?

A few months ago I interned at this organization; and, as a going away present, I decided to spend my last week, with whatever off time I had, to investigate the factors that affect teacher salaries. ...
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5answers
12k views

What happens if the “control variables” are also endogenous?

I work in Political Economy, and a lot of the models include "innocent" control variables such as population, inequality, colonial legacy, etc. so that the author can claim unbiasedness on their ...
13
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2answers
5k views

Where can I find data on income and social mobility over time? How far back is data available?

I'm interested in income and social mobility. I understand that Piketty's research deals with the the distribution of income over a long time period. I have also seen some of Chetty and Saez's ...
12
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4answers
759 views

What are the empirical techniques to show causation?

A simple linear regression only shows correlation between two variables. To establish causation, two commonly taught methods are IV regression and natural experiments. What are the other methods ...
12
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3answers
925 views

Understanding the construction of stochastic processes

I've seen stochastic processes modeled/constructed in the following way. Consider the probability space $(\Omega, \mathcal F, Pr)$ and let $\mathbb S$ be the (measurable) transformation $\...
11
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3answers
394 views

Can econometrics test for correlation or causality between prices and corruption?

This week there was news that some prices are rising. I heard that in some countries where corruption is high the prices are also higher. I wonder if there is causaility or just both at same. It would ...
11
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3answers
3k views

Open access datasets for teaching IV regression

I am looking for a dataset to show (to a group of engineers) how the instrumental variables technique is used in econometric practice. I could always make up my own data, but I think it might be ...
11
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1answer
287 views

What are the economic impacts of different professions?

Every dollar a research worker earns makes the economy \$5 better off and every dollar a finance worker makes costs the economy \$0.60 So Reddit Economics yesterday posited and later retracted the ...
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3answers
30k views

Prove the sample variance is an unbiased estimator

I have to prove that the sample variance is an unbiased estimator. What is is asked exactly is to show that following estimator of the sample variance is unbiased: $s^2=\frac{1}{n-1}\sum\limits_{i=1}^...
10
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2answers
855 views

OLS bias in demand estimation: the bias always underestimate the demand's elasticity?

Some papers argue that OLS can produce less bias than IV estimation depending on the quality of your instruments. Suppose we consider a demand estimation equation. Suppose the demand elasticity is ...
10
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3answers
538 views

Nobel prize for empirical work

Did any recipients of the economics Nobel prize receive their prize for work that was primarily or substantially empirical (rather than theoretical) in nature?
10
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2answers
819 views

Regression over the whole population

What's the meaning of the standard error of a coefficient in a regression when the whole population is included? I've been so puzzled by this question. Because it seems to me, standard errors make no ...
10
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2answers
6k 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,...
10
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0answers
448 views

How can I test for autoregressive residual terms in a fixed effects panel Poisson model?

I have panel data for counts of new firms in different regions for six years. I am estimating a static poisson regression with multiplicative fixed effects$^*$; I have also tried to estimate a dynamic ...
9
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3answers
19k views

What is the difference between two stage least squares and instrumental variable regression?

I'm doing independent study and I am having trouble understanding the difference between these two estimators. I get that 2SLS is predicting the endogenous variable, and that instrumental variables ...
9
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2answers
2k views

R or Python for private sector economist/strategist

Quick question (but complex answer) : R or Python ? I work as an economist/Strategist in the finance industry. As I do a lot of presentations, notes-writing, data searching, my programming time is ...
9
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5answers
866 views

What is the evidence that econometrics has empirical value?

Economies are extremely complex systems with many variables, not to mention the fact that they emerge from the interactions of complex beings. I agree that economies have certain underlying principles,...
9
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4answers
4k views

What are some good graduate-level econometrics books for someone with a strong mathematics background?

Related: Book recommendations on empirical methods in economic research and econometrics? I would like to focus mainly on graduate texts in Econometrics. From the question above, I gather that ...
9
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2answers
9k views

Bartik Instrument Intuition

I have a question regarding the Bartik Instrument. I understand that this instrument is a particularly important tool that is used in labor economics. From my understanding, this instrument attempts ...
8
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4answers
393 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 $\...
8
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3answers
968 views

Book Recommendation for Microeconometrics of Discrete Data

I am looking for a few good books pitched at different levels to help analyse discrete data. Specifically: Specification, Estimation and the application of econometric methods to model discrete ...
8
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3answers
1k 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 ...
8
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1answer
445 views

Alternative way of deriving OLS coefficients

In another question of mine, an answerer used the following derivation of OLS coefficient: We have a model: $$ Y = X_1 \beta + X_2 \beta_2 + Z \gamma + \varepsilon, $$ where $Z$ is unobserved. Then ...
8
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1answer
271 views

What shoud we do when the expected treatment overlaps control sample in DID?

In a generalized Difference-in-Differences in Dasgupta,2019 paper, he documented that control countries did not have a leniency law introduced over 2 years before to 5 years after the introduction of ...
8
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1answer
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. ...
8
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2answers
1k views

Reduced Form of an econometric model, identification problem and test

Looking for some help to understand the following problem and how to use the reduced form in econometrics Consider a model for the health of an individual: $$health = b_0 + (b_1)age + (b_2)weight + (...
7
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5answers
193 views

Current status and trends in the choice of software for teaching econometrics

My institution is updating some of its bachelor and master study programs in economics and business administration, and the question of choice of software for econometrics and related classes has come ...
7
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9answers
873 views

What are some further readings in Econometrics you recommend?

I've reached the end of my Econometrics courses for the undegraduate level at my university, but I would like to continue learning. I hope I could get some recommendations for further reading. I ...
7
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2answers
385 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 ...
7
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2answers
655 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 ...
7
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4answers
2k views

Mathematical open problems that (when answered) might unlock MAJOR mathematical (micro)economics/finance/econometrics discoveries

Are there any (specific) math open problems that mathematical (micro)economics / finance / econometrics researchers wish mathematicians could solve for their discoveries to flourish? If positive, ...
7
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1answer
323 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 ...
7
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3answers
228 views

Predicting $y$ when response variable is $\ln(y)$

My estimated model is $$\hat \ln(y_t)=9.873-0.472\ln(x_{t2})-0.01x_{t3}$$ I'm asked to find a predictive CI at 95% confidence for the mean of $y_0$, when $x_{02}=250$, and $x_{03}=8$. We're to ...
7
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1answer
2k views

Instrumental variables vs control function: Which approach and why to handle endogeneity?

I'm curious if anyone here can summarize the differences between the I.V. and control function approach to handling endogeneity. I think endogeneity is usually addressed using the 2SLS or IV approach ...
7
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2answers
107 views

Do people really care about higher moments?

I have heard that people often handle uncertainty using point estimates not probability distributions. However, I have been unable to find any evidence for this in the heuristics and biases literature....
7
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1answer
4k views

The Frisch-Waugh-Lovell Theorem: an exercise

I have an equation of the form(all vectors): $y=X_1\beta_1+X_2\beta_2+u$. I'm interested in knowing if the beta OLS estimators and respective residual for this equation are the same as for when we ...
7
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2answers
228 views

Independence of latent price and market microstructure noise

When examining how Market Microstructure works and affects price formation, there is talked about the: "Assumed independence of of latent price and microstructure noise" From "On the Correlation ...
7
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1answer
196 views

Literature on factors affecting number of houses built

Is there any existing literature on the various factors affecting the number of houses constructed in a particular city over, say, a given month? Factors might include: quality of housing stock, a ...
7
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1answer
1k views

How to show that GLS estimator is consistent in regression model?

$$\mathbf Y=\mathbf X\beta + \mathbf U$$ $$\mathbf E[\mathbf U\mathbf U']=\Omega $$ $$\hat \beta - \beta=(\mathbf X'\Omega^{-1}\mathbf X)^{-1}\mathbf X'\Omega^{-1}\mathbf U$$ let $\mathbf X^{*}=\...
7
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2answers
1k views

Best instruments for “years of schooling”/“education”

As an answer to question “Seminal papers that later were proven to contain errors”, @snoram mentioned Angrist and Krueger (1991), and there use of quarter of birth as an (exogenous) instrument for ...
7
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1answer
3k views

White versus Newey-West standard errors

could you please help me to understand when I should use either white or newey-west standard erros? I do work with time-series data. I look at both contemporaneous and intertemporal realtionships. ...
7
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1answer
243 views

Regression discontinuity questions

I am considering a regression discontinuity design (RD) where the "treatment" has a definite sorting rule (below the threshold, you are not fined - above the threshold, you are fined). The outcome I ...
6
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3answers
130 views

More complex than simple and multiple regressions?

I am currently in an Econometrics class that requires us to write a research paper that showcases our skills in regression/ modeling. What is slightly more complex than simple and multiple ...
6
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4answers
519 views

P-value hacking

P-value hacking is the "art" of looking at different outcomes and specifications until you get a "false positive", i.e. a p value under, say, 0.05, which only noise and not true under the data ...
6
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2answers
434 views

What is the difference between ATE and ATT?

I saw ATE and ATT in some discussions regarding DID settings recently. ATE is the Average Treatment Effect while ATT is Average Treatment Effects on Treated. I am wondering the difference between ...
6
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2answers
100 views

Economists studying the eldery and intergenerational transfers

Does anyone knows who are the leading economists in the field of elderly and intergenerational transfers? I'd like to know what are the current topics they are working on.
6
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3answers
8k views

Robust Standard Errors in Fixed Effects Model (using Stata)

I'm trying to figure out the commands necessary to replicate the following table in Stata. This table is taken from Chapter 11, p. 357 of Econometric Analysis of Cross Section and Panel Data, Second ...
6
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1answer
2k views

Doing a PhD Economics without background in formal theorems?

I could really use some advice. I am a new PhD student in Economics and Finance. My background is in economics, and while I did mathematics in my Master's course, it was more data-analysis based ...
6
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1answer
1k views

What statistics and linear algebra book do i need before reading Hayashi's econometrics

What statistics and linear algebra book do I need before reading Hayashi's Econometrics? Basics linear algebra book seems too simple for the linear algebra part, and Casealla's statistical inference ...

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