Introduction

I am somewhat reluctantly starting this blog on econometric stuff that applied people will hopefully find useful. I am wary to do so because I do not consider myself to be an econometrician; I am an applied econometrician. As such, I suffer from a bit of imposter syndrome in creating a blog on econometric topics.

That said, my goal is to make applied types aware of some issues - in as nontechnical way as possible (as I said, I am not an econometrician) - that arise in typical applied (micro) research. The issues I find fascinating are the subtle parts of econometrics that individuals either may not have learned or may have forgotten. By diving a bit into how various econometric methods work in practice, we hopefully will all better understand how the econometric sausage is made. Perhaps ignorance is bliss, but as economists we tend to relish in the dismal.

 I am fortunate to teach econometrics at SMU and think all empirical types should teach econometrics. It's amazing what you can learn or re-learn every time you teach. I often describe econometrics to my students the same way Shrek describe ogres: it's like an onion, with many layers, and each time we re-visit a topic we pull back another layer and learn something new. Of course, donkey's response was just that "onions stink." So, make of that what you will.



Thanks to all those on #EconTwitter for encouraging me to do this! And thanks to those who have created other econometric blogs before me and served as my inspiration. I hope someone gets something out of this, as I do from these other blogs.

Popular posts from this blog

The Great Divide

Image
I applaud the fact that the American Economic Association, the European Economic Association, the Econometric Society, and the Royal Economic Society have established an ad-hoc joint committee tasked with proposing ways to improve the publication process in economics. I encourage everyone to fill out the survey  (limited to members of the AEA, EEA, ES, and RES, however) even though I am quite cynical about what may come of it. Although only tangentially related, I decided to write a post about a topic that vexes me (and others to whom I have spoken, but I will leave it to them to out themselves) at the intersection of the Venn diagram containing publishing (editing and refereeing), teaching, and econometrics.   What lies at this intersection is the great divide between theoretical and applied econometrics, both in the classroom and in the wild.  As I have progressed in my career, I have enjoyed writing more econometrics papers and fewer economics papers per ...
Read more

There is Exogeneity, and Then There is Strict Exogeneity

Image
Panel data has become quite abundant. As a result, fixed effects models have become prevalent in applied research. But, this week I handled a paper at one of the journals for which I am on the editorial board and was reminded of a mistake that I have seen all too frequently over the years. Most researchers are probably aware of the issue I am highlighting, but indulge me. In a cross-sectional regression model, we have y_i = a + b*x_i + e_i OLS is unbiased if x is exogenous , which requires that Cov(x_i,e_i) = 0. In other words, the covariates need to be uncorrelated with the error term from the same time period. In contrast, in a panel regression model with individual effects, we have y_it = a_i + b*x_it + e_it If we wish to allow for the possibility that Cov(a_i,x_it) differs from zero, then a_i is a "fixed" effect instead of a "random" effect. To understand what we need to assume to obtain unbiased estimates of b, we need to understand how the model i...
Read more

Black Magic

Image
The world is a very different place from when I started this blog. The pandemic is over ... but I'm not sure we are in a better place. Different, not necessarily better. This brave new world has made it hard for me to find the time and mental energy to continue this blog. Moreover, with the changes at #EconTwitter ( X ) , no one may read this anyway. Nonetheless, I move forward and we shall see if this post (and any future posts) provide utility to anyone beyond myself.  So, I have spent some time thus far this summer revising my lecture notes (available here  ... although it is still in progress for some). I still stand firm in my belief that all empirical researchers ought to teach econometrics (if for no other reason as a constant reminder that there is more to the field than diff-in-diff). As I did so, I added two new extensions to my discussion of -- what else -- measurement error. But, this post is not about measurement error per se. Really. No, I mean it. Instead, it is...
Read more