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.

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40
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1answer
23k 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
3k 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
10k 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
649 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 ...
11
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3answers
365 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
804 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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1answer
253 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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5answers
813 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,...
10
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3answers
2k 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 ...
10
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2answers
695 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 ...
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469 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?
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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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2answers
476 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 ...
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0answers
396 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 ...
8
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3answers
13k 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}^...
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3answers
719 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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4answers
2k 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 ...
8
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1answer
313 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
4k 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. ...
7
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3answers
12k 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 ...
7
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4answers
1k 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, ...
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2answers
96 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....
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3answers
199 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
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 + (...
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2answers
201 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
152 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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2answers
3k 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 ...
7
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2answers
803 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
182 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
123 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
476 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
305 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 ...
6
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2answers
96 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
5k 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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2answers
794 views

Deriving the translog production function

Ive been having difficulty deriving the translog production function defined as: $$\ln y=\alpha_0+\sum_{i=1}^n\alpha_i \ln x_i+\frac{1}{2}\sum_{i=1}^n\sum_{j=1}^n\ \beta_{ij}\ln x_i\ln x_j $$ I know ...
6
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1answer
667 views

Why is VAR analysis all linear? Why not nonlinear?

When doing VAR analysis, it is almost always a linear form that gets used. Is there any justifying reason (most DSGE models are non-linear unless linearized) to use a linear form?
6
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1answer
143 views

Convergence in probability and convergence in distribution

Im a little confused about the difference of these two concepts, especially the convergence of probability. I understand that $X_{n} \overset{p}{\to} Z $ if $Pr(|X_{n} - Z|>\epsilon)=0$ for any ...
6
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1answer
392 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, ...
6
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2answers
974 views

CES production function estimation

Introduction There are different ways of estimating the parameters of a production function. For example, single-equation and system equation techniques are both possible. Another difference among ...
6
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1answer
99 views

Showing that a transformation is measure preserving

Note: This question is related to this question about the construction of stochastic processes. Specifically, it relates to the transformation $\mathbb S: \Omega \rightarrow \Omega$ that is mentioned. ...
6
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1answer
122 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 ...
6
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2answers
155 views

How Do Economists Quantify Contagion?

In the context of international financial crises, what mathematical methods have Economists employed in order to quantify financial contagion? Note: For a working definition of contagion I'll use the ...
6
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1answer
4k views

How do I calculate price elasticity of demand using historical price and quantity data?

I work for a company that produces retail items and I am tasked with calculating the price elasticity of demand for a subcategory that shall remain unnamed. I have 5 years of monthly market data that ...
6
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1answer
642 views

Hausman Test for Simultaneous Equations

Given a set of structural equations: Demand Function: $$Q_1 = \alpha_0 + \alpha_1 P_t + \alpha_2 I_t + \alpha_3 R_t + \mu_{1, t}$$ Supply Function: $$Q = \beta_0 + \beta_1 P_t + \mu_{2, t}$$ Where $...
6
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1answer
93 views

Why is macroeconomics studied through “Shocks”?

"Why is modern macroeconomics all about identifying this shock and that shock?" Coming from a theoretical econometrics background, I have recently delved into empirical macro literature. I am a bit ...
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2answers
8k 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 ...
6
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1answer
64 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 ...
6
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1answer
161 views

How to specify a Diff-In-Diff Regression with multiple time periods?

I'm working on analysing experimental data for a thesis project. The data consists of subjects performing the same task over five rounds, and I'm interested in the difference in trends between ...