In regression analysis, we often check the assumptions of the econometrical model regressed, during this, one of the key assumptions is that the model has no omitted variables (and it’s correctly specified). In 1969, Ramsey (1969) developed an omitted variable test, which basically uses the powers of the predicted values of the dependent variable to …
“A replication study attempts to validate the findings of a published piece of research. By doing so, that prior research is confirmed as being both accurate and broadly applicable” A replication process generally consists of two parts. The first part is concerned with reproducing key findings from the original study. If this step was successful, …
In the last month, while I was researching through the literature of the military expenditure and economic growth, I found a little statement from an article, which appointed one of the things less discussed in econometrics, such statement is: “The Holy Grail of applied econometrics is a tight theoretical model, which fits the data well. …
Following the last post which gave an example to model the Cobb-Douglas utility function regarding microeconometrics, we need to provide an important aspect related to the behavior of the consumer. That is the budget constraint (referred to as a monetary linear constraint) which limits the number of goods that the consumer can buy and use …
The budget constraints in the microeconomic approach Read More »
Regarding microeconometrics, we can find applications that go from latent variables to model market decisions (like logit and probit models) and techniques to estimate the basic approaches for consumers and producers. In this article, I want to start with an introduction of a basic concept in microeconomics, which is the Cobb-Douglas utility function and its …
A brief example to model the Cobb-Douglas utility function using Stata. Read More »
As we saw in other econometric blogs of M&S Research Hub, the use of logarithms constitutes a usual practice in econometrics, not only for the problems that can be derived from overusing them, but also it was mentioned the advantage to reduce the Heteroscedasticity -HT- (Nau, 2019) present in the series of a dataset, and …
The difference in Difference (DiD) is a popular method in empirical economics and has important applications in other social sciences as well. DID is a quasi-experimental design that uses panel data to estimate the effects of specific intervention or treatment (such as policy changes, new laws, social program implementation) on outcomes over time and between …
Robust Modeling of Policy Changes: Difference in Difference (DiD) Read More »
A usual practice while we’re handling economic data, is the use of logarithms, the main idea behind using them is to reduce the Heteroscedasticity -HT- of the data (Nau, 2019). Thus reducing HT, implies reducing the variance of the data. Several times, different authors implement some kind of double logarithm transformation, which is defined as …
Taking Logarithms of Growth Rates and Log-based Data. Read More »
