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.
1,338
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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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5
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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 ...
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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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4
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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 ...
13
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3
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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 $\...
13
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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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3
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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:
$s^2=\frac{1}{n-1}\sum\limits_{i=1}^...
12
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4
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What are the empirical techniques to show causation?
A simple linear regression only shows correlation between two variables. To establish causation, two commonly taught methods are IV regression and natural experiments. What are the other methods ...
12
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0
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How can I test for autoregressive residual terms in a fixed effects panel Poisson model?
I have panel data for counts of new firms in different regions for six years. I am estimating a static poisson regression with multiplicative fixed effects$^*$; I have also tried to estimate a dynamic ...
11
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3
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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 ...
11
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3
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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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3
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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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2
answers
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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,...
11
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1
answer
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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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4
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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 $\...
10
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2
answers
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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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3
answers
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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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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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4
answers
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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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2
answers
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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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5
answers
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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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4
answers
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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, ...
9
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1
answer
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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, $$ where $Z$ is unobserved. Then ...
9
votes
1
answer
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How do I calculate price elasticity of demand using historical price and quantity data?
I work for a company that produces retail items and I am tasked with calculating the price elasticity of demand for a subcategory that shall remain unnamed. I have 5 years of monthly market data that ...
9
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2
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Bartik Instrument Intuition
I have a question regarding the Bartik Instrument.
I understand that this instrument is a particularly important tool that is used in labor economics. From my understanding, this instrument attempts ...
8
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3
answers
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Book Recommendation for Microeconometrics of Discrete Data
I am looking for a few good books pitched at different levels to help analyse discrete data.
Specifically: Specification, Estimation and the application of econometric methods to model discrete ...
8
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3
answers
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Identifying assumption meaning
I am hoping to get a good explanation regarding what is meant by an identifying assumption.
In many articles, under empirical strategy, authors state that:
we exploit firm level variation to identify ...
8
votes
1
answer
5k
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How should one determine the proper number of lags in a time series regression?
I am using time series data in economic model estimation. I want determine proper lag for Error Correcting Model (ECM) model for example. I can check AIC, SC and HQ criterion for determine proper lag. ...
8
votes
1
answer
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How to show that GLS estimator is consistent in regression model?
$$\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^{*}=\...
8
votes
2
answers
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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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4
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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 ...
7
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5
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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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9
answers
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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
votes
2
answers
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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
votes
2
answers
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Econometrics blogs (after Econometrics Beat has been closed)
I used to follow Dave Giles' blog called Econometrics Beat. I enjoyed it very much and learned tons from it. Unfortunately, the professor retired and closed the blog three years ago. I would like to ...
7
votes
2
answers
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Testing for serial correlation with General Regressors
This is from Introductory Econometrics (Wooldridge) 5th Edition page 420.
Consider:
$$y_t =\beta_0 +\beta_1 x_{1t}+\beta_2 x_{2t}+...+\beta_k x_{kt}+u_t$$
where $Cov(u_t, x_{jt})=0$ for all $j$ but ...
7
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2
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Deriving the translog production function
Ive been having difficulty deriving the translog production function defined as:
$$\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 $$
I know ...
7
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2
answers
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The Frisch-Waugh-Lovell Theorem: an exercise
I have an equation of the form(all vectors): $y=X_1\beta_1+X_2\beta_2+u$.
I'm interested in knowing if the beta OLS estimators and respective residual for this equation are the same as for when we ...
7
votes
1
answer
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Is there empirical evidence on usability of Cobb-Douglas production function?
I am trying to estimate a simple Cobb-Douglas production function $Y=AL^{\alpha}K^{\beta}$
on US data and get an unrealistic estimate of $\alpha$ and a high p-value for $\beta$.
Structure of ...
7
votes
3
answers
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Predicting $y$ when response variable is $\ln(y)$
My estimated model is
$$\hat \ln(y_t)=9.873-0.472\ln(x_{t2})-0.01x_{t3}$$
I'm asked to find a predictive CI at 95% confidence for the mean of $y_0$, when $x_{02}=250$, and $x_{03}=8$. We're to ...
7
votes
1
answer
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Instrumental variables vs control function: Which approach and why to handle endogeneity?
I'm curious if anyone here can summarize the differences between the I.V. and control function approach to handling endogeneity. I think endogeneity is usually addressed using the 2SLS or IV approach ...
7
votes
2
answers
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Reduced Form of an econometric model, identification problem and test
Looking for some help to understand the following problem and how to use the reduced form in econometrics
Consider a model for the health of an individual:
$$health = b_0 + (b_1)age + (b_2)weight + (...
7
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2
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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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2
answers
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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 ...
7
votes
2
answers
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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
votes
1
answer
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Portion of Derivation of F-test
In Greene's Econometric Analysis there is a derivation regarding the F stat. The setup is a null hypothesis of the form: $H_0: R\beta =q$ where $\beta$ is a $k\times 1$ vector of parameters, $R$ is a ...
7
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1
answer
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Incidental Parameters and Poisson Regression
Consider:
$\ln(E[Y|X])=X_{it}'\beta+\alpha_i$ and thus $E[Y|X]=e^{X_{it}'\beta+\alpha_i}$.
We can write this regression model as:
$$Y_{it} =e^{X_{it}'\beta+\alpha_i}\eta_{it} $$
For which the ...
7
votes
1
answer
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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 ...
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2
answers
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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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1
answer
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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.
...