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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23 views

Does GMM have any assumptions that you can't test empirically (and must instead argue qualitatively for)?

My understanding is that you can empirically test some of the main assumptions required for using a GMM estimator. Namely, I understand that you can test over-identifying restrictions with Hansen's J ...
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2answers
89 views

Unit root testing in Eviews

I've plotted my data log(GDP) which displays an albeit small upward trend. However, after performing an ADF unit root test log(GDP) it suggests that I can reject H0 [that there is a unit root] at the ...
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1answer
455 views

What R-squared is a low R-squared?

I keep hearing that R-squared does not really matter in economics research and that due to the unpredictable human nature, economics research regressions tend to have low R-squared. But how much is ...
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1answer
62 views

Dif-in-Dif aggregating or not?

If I have data that is on some level, say industry-county-year, and a certain treatment, say a regulation change in some states in certain years. Is it possible to run a Dif-in-Dif on the industry-...
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1answer
35 views

Estimating a difference-in-differences with multiple time periods: why do margins results change when you simply change the base period?

My understanding of margins results is that they should not be sensitive to the base period chosen for a categorical time variable. However, I find that they are. ...
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38 views

Imputing # of unemployed from Labor Force Survey

I am working on state-level data, where one state has recently stopped publishing the absolute figures for the number of the unemployed. Instead, it currently only releases U and LFP rates. ...
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0answers
86 views

What is the observable definition of "preference" by Frisch?

To make things weird, although Frisch was fully aware of the importance of random distribution in economics relations, he never mention the randomness in binary preference relations! How to define ...
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38 views

complex Difference-in-difference formula

I have 5-year sales information from a grocery store in Canada. I want to check whether an event that happened in 2017, affected the effect of the price of a product on its sales. For example, imagine ...
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44 views

Endogeneity in demand estimation using demand systems estimations

Assume I have quantities and prices for J products across M markets in T periods. I want to estimate their elasticities. I construct J regressions of this type: $$\log \left(q_{j m t}\right)=\alpha_{t}...
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t test and F test are equivalent under single restriction case

In Classic linear regression model, under the single restriction $$y=X\beta +u$$ $$H_0: \beta_j=0$$ If I apply t test, then the t statistic is derived as follows $$\frac{b_j-\beta_j}{s\sqrt{a_{jj}}}$$ ...
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Is unobserved heterogenity in mixed logit models variable specific?

I have a mixed logit model with travel cost, travel time, and mode constants. If I only randomize travel cost and keep fixed coefficients for travel time and mode constants, will the model capture ...
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Measure of Public Transportation Efficiency (Consumer side)

I'm looking for data on public transportation efficiency for consumers by city or county. In some places you can get across town in under 20min and in other places it takes 2hrs and this likely has ...
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Measure of urban-ness or city density

I have a dependent variable I want to examine in relation to a measure of city density. This means city population as well as geographical spread. Ideally, it would also include a measure of ...
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37 views

How can I add a multidimensional panel to estimate TFP (year, id, region) in R?

I'm not sure about adding fixed effects for the variables year,id,region (using the estprod library) as in this paper using LP stimator. In the STATA forum ( #18 #...
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1answer
63 views

Change vs Difference

I have data on "share in labor employed in manual occupations" for two years (i.e. 1980 and 2005) and looking to create the following dependent variable: change in the share of labor ...
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25 views

Methodology of Estimating Economic Costs?

To be specific, I am currently devising an honours thesis proposal to estimate the effects of a lack of competition in consumer electronic repair markets on variables such as firm profits, consumer ...
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45 views

What type of econometrics is practised most?

This might sound like a weird question, but what type of econometrics is most common in academia and / or the private sector? Here I am thinking about time series econometrics (Bayesian and ...
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Does a structural variance break in one variable of a VAR model matter?

There is a structural variance break in one of my variables ($y_t$) for a VAR model (visually though). Using an AR(1) model and CUSUM square test, I was able to detect it. However, after putting it ...
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25 views

Use MLE to calculate exponential distribution parameter

The question is from A Guide to Econometrics by Peter Kennedy (5th edition, page 504.) Suppose you have a random sample of workers, from several localities, who have recently suffered, or are ...
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1answer
119 views

Can one use the standard deviation of a variable as a regressor?

I am wondering if you could use the standard deviation of a variable as a regressor in an econometrics model? Consider the following hypothetical model: $$y_{it} = \alpha_0 + \alpha_{1}T_{it} + \...
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1answer
67 views

Unbalanced panel data in prodest package in R

I have a question regarding the usage of unbalanced panel data for TFP estimation by using the prodest package. The dataset could be found here: https://drive.google.com/file/d/...
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4answers
404 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 $\...
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29 views

Multiple binary instruments

Suppose we use instrumental variables with a single binary instrument $Z$. Let $Y$ denote the (continuous) outcome and $X$ denote the single explanatory variable of interest. If I understand matters ...
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1answer
74 views

Categorical variable as explanatory variable (right hand side)

In a linear probability model, or any sort of regression, one can use fixed effect estimation by simply adding in a STATA code i.something. This "something" can be either a village, a county or a ...
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2answers
236 views

Plim of ols estimator

Suppose you are given 2 models. Model of 1 has $y$ as the dependent variable and $x$ as the independent: $$y = \beta_0 + \beta_1 x + \epsilon$$ Model 2 has $w$ as the dependent variable and $x$ as ...
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10 views

Diff-in-Diff framework where treatment time is not fixed and multiple treatment group with sub level of treatment

The study is analyze a data for 30 yrs time period with two treatment group denoted T_1 & T_2 and a control group. Treatment ...
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0answers
26 views

Instrumental variable regression: How many interpretations?

I was reading Amemiya "Non-linear regression models" (1983) in which he says that This statement should not be construed as a criticism of Theil's interpretation. I know of at least six ...
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1answer
59 views

How does explanatory variables in variance affect unconditional variance of GARCH(1,1)

I have a question about the unconditional variance of a GARCH process, where exogenous explanatory variables are included in the variance. The usual GARCH models the variance using: $$\sigma^2_t=\...
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1answer
100 views

Mathematical framework for modelling the relationship between price and sales of a product

In my job as a data scientist, I am required to model the relationship between the price of a product and the sales or number of unit sold. I am trying to build a simplistic model, the assumptions of ...
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1answer
48 views

How do I run a regression with the restriction that one set of parameters are proportional to another?

I'm running a regression with a set of 3 dummy variables (for four categories of a variable) and these 3 dummies interacted with a continuous variable. I want to impose the restriction that the vector ...
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0answers
48 views

Deconvolution in economics

Here it says In mathematics, deconvolution is an algorithm-based process used to enhance signals from recorded data. Where the recorded data can be modeled as a pure signal that is distorted by a ...
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0answers
21 views

Proof of Criteria for Local Identification in Rothenberg (1971)

My question is regarding Theorem 1 (page 579) of Rothenberg (1971). It is associated with four assumptions given on the same page. But, I only have a question about a single step of the proof, so I ...
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1answer
50 views

These two estimators are equal?

I have a question so basically. I have two model $$y= X_1b_1+X_2b_2+u$$ And $$X_2=y\beta_1+X_2\beta_2+v$$ I want to show $b_1=\beta_1$ Are these estimators are equivalent? $$b_1= (X_1’M_1X_1)^{-1} X_1’...
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13 views

Maximizing Quality Indicator

I am having a countries panel data on macro variables<gdp, inflation etc) and a continuous quality indicator variable(with gaps) . My models suggests that the quality indicator is a factor for gdp ...
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1answer
24 views

The instrument in "The Colonial Origins of Comparative Development"

I am hoping to understand when an instrument is appropriate. For the purposes of this question, I'm considering a simplied version of the model in AJR (2000): $$\begin{aligned}\text{GDP} &\sim \...
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2answers
50 views

Arch Model and $\sigma$

In my problem set about ARCH models I'm given that $\epsilon^2_{t}=\alpha\epsilon^2_{t-1}+v_{t}$ But then I'm asked to calculate $E(\sigma^2_{t+n}|I_{t-1})$. So is the same to calculate $E(\epsilon^2_{...
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0answers
29 views

Hodrick Prescott filter for quality variables

I am having a countries panel data on macro variables<gdp, inflation etc) and a continuous quality indicators variable . My models suggests that the quality indicator is a factor for gdp to reach ...
3
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1answer
82 views

Existing metric for personal productivity hours needed per life hour?

With about 50 hours of productivity a week, including work, cooking, etc. I can complete the tasks and pay the expenses necessary to live about a week. Subtract maybe 5 hours of labor that goes into ...
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25 views

Is it okay to difference data with different time intervals?

I have a question that is from an old project and that I want to clarify purely for future research. The question is, if you have a time-series that occurs at intermittent intervals, say once ever 4, ...
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0answers
18 views

Persistency in a VAR model

VAR, SVAR, BVAR, TVP-VAR, etc, I have a feeling that the persistency of the impulse responses will not change much irrespective of the model, even if impulse responses in the first period of the shock ...
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24 views

Triple Difference model using Repeated cross-sectional data

I have a repeated cross-sectional data from the Demographic and Health Surveys. And I want to run a triple difference model, along the lines of Yelowitz (1995). My identification strategy is such that ...
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2answers
59 views

Log-linear ordinary least squares specification coefficient loses its interpretation when we change an explanatory variable by a unit?

Ok, so something that's common to the econometrics literature is that we interpret the coefficients in OLS log-linear models like such. To spell it out in the main body: $ln(y_i)=\beta_0+\beta_1X+u_i \...
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1answer
96 views

Show that conditional variance of error in linear probability model is heteroskedastic?

I have a problem that asks me the following: " Consider the linear probability model, in which we specify the regression equation to be linear in X, E(Y |X = x) = Pr(Y = 1|X = x) = x'β We can ...
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4answers
342 views

Could you recommend a book or lecture notes about time series that is easy to understand?

What are some time series texts that you would recommend to start studying? Some easy textbooks/lecture notes or step by step for undergraduate level. I'm not so good at math/statistics.
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13 views

Interaction term between lagged and non lagged variable Fixed/Random effect model

I am analyzing a panel dataset. I am wondering if I could use an interaction of a lagged variable ( one time step behind) and a non lagged variable ( both continuos indipendent variables) and still ...
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1answer
49 views

Rule of thumb for confidence level

Typically in statistical software, the default confidence level is 95%. The higher the better, I suppose. But this is still not a rule of thumb, right? In Stock and Watson's paper (https://www.aeaweb....
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1answer
24 views

Log-Linear Model

I know that the log-linear model shows the percent change in y if there is a one-unit change in x but how would you solve for it the other way to show a percent change in x if there is a one-unit ...
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1answer
45 views

Difference in interpretation of log-lin coefficients with binary variable

Consider the model: $$y_i=\beta_0+\beta_1D_1+\beta_2D_2+u_i$$ Where $D_1=\{0,1\}$ and $D_2=\{0,1\}$ are binary (dummy) variables, and $y_i$ is a continuos variable in levels. In this model, for ...
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0answers
46 views

How can I formulate price elasticity of demand equation when I want to add cross price elasticity?

I am trying to calculate the price elasticity of demand for a product where I used the equation log(volume) = elasticity * log(price) + seasonality dummies + trend index + CPI Here CPI is the consumer ...
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1answer
69 views

Fixed Effects Model Interpretation

$$\ln(\text{pay})_{itj}= \alpha_{ij} + \beta\ln(\text{performance})_{jt} + \gamma X_{ijt} + T_t + ε_{ijt}$$ This fixed effects model was used to investigate the link between pay-performance throughout ...

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