14
votes
How much do second-hand good purchases affect first-hand demand?
Coase (1972) has a classic treatments of this issue for monopolists selling durable goods. The general idea is that if Alice sells a textbook to Bob, Bob can resell it to Charlie when he is done with ...
- 15.9k
12
votes
Accepted
Citing non-economics studies in an economics research paper
As long as the main results/conclusions of your paper don't rely solely on the non-economics literature you cite, you should be okay. In other words, it's perfectly fine to use non-economics ...
- 14.3k
11
votes
Accepted
What does it mean to make an identification assumption?
Identifying assumption: assumptions made about the DGP that allows you to draw causal inference. E.g. exogeneity assumption for IV, parallel trends assumption in diff-in-diff.
Identifying assumptions ...
- 2,559
9
votes
Accepted
Cobb-Douglas production function with expenditures rather than units
Sure you can, just that your interpretation of your variables in your analysis changes however. In this case you are analyzing how investment in differing factors of production affect output.
I'd ...
- 7,685
9
votes
Accepted
Why the larger the sample, the lower standard deviation?
Intuitively, variables that only vary at the group level should have a lower variance (and therefore lower standard deviation) than comparable variables that vary at the individual level.
As these ...
- 8,737
8
votes
Accepted
What are some good repositories for economic data
Be more specific on what you need.
Quandl would be a pretty general source which hasn't been mentioned yet.
For macro data the St. Louis Fed is pretty good and thorough. Eurostat for European data. ...
8
votes
Citing non-economics studies in an economics research paper
There seem to be two things:
The first is that "perceived value" is not something that directly corresponds to something economists usually study. It might be related to, say, marriage ...
- 9,415
8
votes
Accepted
Why we need at least 40 groups to be properly clustered?
First of all, clustering only changes the (estimated) standard deviations of your coefficients. Whether you cluster or not will not change the coefficients themselves and therefore also not the "...
- 8,737
8
votes
Accepted
Including an endogenous covariate in a regression model as a control to estimate the effect of another variable of interest
If I include $z_1$ in the model, like this:
$$
> y = \beta_0 + \beta_1 x + \beta_2 z_1 + e,
> $$
Does that mean that $\beta_1$ is predominantly capturing the effect of $z_2$?
Yes. This can be ...
- 8,737
7
votes
Accepted
How do we estimate production functions?
The following is the basic idea if we are to estimate the parameters by linear regression.
Take the natural log of the production function $F(L,K)=L^aK^b$, you will then get $$\ln(F)=a\ln(L)+b\ln(K).$...
- 923
7
votes
Accepted
Estimating CES utility (not production) function parameters
It may be interesting to exploit the homothetic separability of the CES utility function in $x$. It implies that
$$\frac{x_i}{x_j} = \left( \frac{\alpha_i}{\alpha_j}\frac{p_j}{p_i} \right)^\sigma $$
...
- 2,527
7
votes
Cobb-Douglas production function with expenditures rather than units
If prices are constant then quantities are proportional to expenditures. Consider :
$$ Y=AK^{\alpha}L^{\beta} = A(\frac{E_{K}}{r})^{\alpha}(\frac{E_{L}}{w})^{\beta} $$
$$ = (\frac{A}{r^\alpha w^\...
- 15.9k
6
votes
Accepted
How should one determine the proper number of lags in a time series regression?
I don't have advice specific to error correcting model (ECM) setting, but in undergraduate applied econometric class they gave us the generic advice to continue to extend lags in the model until the ...
- 15.9k
6
votes
Accepted
Difference-in-differences in 2SLS regression
Well, if you believe that treatment is endogenous (which depends on the problem at hand here and is not an inherent feature of the model), then using eligibility as an instrumental variable will help ...
- 573
6
votes
Accepted
What is a good proxy for government quality?
Using corruption is part of it but a bit restrictive way to measure government "quality". You may use aggregate indicators as the one developed by the Worldwide Governance Indicators (WGI) project ...
- 6,652
6
votes
Accepted
Is there empirical evidence on usability of Cobb-Douglas production function?
The simple answer to why the Cobb-Douglas functional form is used is because it is at least a log-linear approximation to some higher-order production function. That is, suppose you take a functional ...
- 9,107
6
votes
Identifying assumption meaning
"Identification" is the most loaded term in econometrics. There are multiple cheap talk equilibria with regard to its meaning. It is used with different intended (but related and overlapping)...
- 2,559
6
votes
Accepted
What are the main differences among xtreg, areg, reghdfe?
xtreg
xtreg is a general command for panel regression. The panel regressions will have the following general form (see stata manual):
$$y_{it} = α + \mathbf{x_{it}β}...
- 41.6k
6
votes
Accepted
From conceptual framework to econometric estimation
Use non-parametric regression. A particular version that comes to mind is local linear regression. This can be written as
$$Y_i = \beta_{0i} + \beta_{1i}X_i + \epsilon_i,$$
thereby allowing for ...
- 3,247
5
votes
Is a hedonic regression a reduced-form?
In the benchmark hedonic price analysis, we assume a utility function of the general form
$$U = U(x, z_1,...,z_n)$$
where "$x$" stands for the composite good, and $(z_1,...,z_n)$ are the ...
- 31.8k
5
votes
What does it mean to make an identification assumption?
Maybe another example will help here:
Imagine you would like to know the effect of smoking on the probability of getting cancer. By simply comparing cancer rates of smokers and non-smokers you might ...
- 61
5
votes
Are there conventions in economics for coding the distance between states?
I think the answer depends on who is impacted by your measure of distance and for what purpose. Kennan and Walker (2011) Econometrica measure distance between states as "the great circle distance ...
- 250
5
votes
What are some good repositories for economic data
The Bureau of Economic Analysis (BEA) is the primary source for US economic data. Other US sources include the Dept of Labor, The Census Bureau, Dept of Commerce, and the US Energy Information ...
5
votes
Accepted
Dealing with Missing Data when Testing the CAPM
Easiest fix: if you're worried about it you should value weight your results. This is suggest by, for instance, Kothari, Shanken and Sloan (1995). Firms that are delisted tend to have extremely small ...
- 1,996
5
votes
Accepted
How to interpret "scale efficiency" in DEA?
First of all, let me tell you that you're doing great. I remember that, being a non-parametric method, it was more difficult for me to understand even the simplest things of DEA.
Now, your ...
- 364
5
votes
Accepted
Omitted variables in gravity model
The omitted variable bias in gravity model is an important issue given that some factors are unobserved or difficult to quantity. To solve this issue trade economists tend to rely on various fixed ...
- 6,652
5
votes
Estimating CES utility (not production) function parameters
This answer closely follows the logic of estimation of translog cost function presented in Section 4.7 of Fumio Hayashi's "Econometrics".
Define for convenience the CES aggregate price index ...
- 215
5
votes
Why we need at least 40 groups to be properly clustered?
First, that is only a rule of thumb, exact number of clusters you need in any case is context dependent.
Second, actually as pointed out by Cameron et al (2008):
A practical limitation of inference ...
- 41.6k
4
votes
BLP using micro data
Yes, the same authors Berry, Levinsohn, Pakes have written a second paper that uses both macro and micro data to estimate demand for automobiles as a function of the characteristics of the car.
"...
- 326
4
votes
Bayesian vs. Frequentist Approach
This is a more "practical" answer, vs a deeper theoretical one, or even a specific one.
Take it as "a broad answer to a broad question."
Also, since it is a "Bayes vs frequentist" issue, at least ...
- 1,048
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