The effect of mismeasured variables in the most straightforward regression analysis with a single regressor variable leads to a least squares estimate that is downward biased in magnitude toward zero. I begin by reviewing classical issues involving mismeasured variables. I then consider three recent developments for mismeasurement econometric models. The first issue involves difficulties in using instrumental variables. A second involves the consistent estimators that have recently been developed for mismeasured nonlinear regression models. Finally, I return to mismeasured left hand side variables, where I will focus on issues in binary choice models and duration models.
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Aigner, Dennis J. & Hsiao, Cheng & Kapteyn, Arie & Wansbeek, Tom, 1984.
"Latent variable models in econometrics,"
Handbook of Econometrics,
in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 23, pages 1321-1393
Elsevier.
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Tarp, Finn, 2006.
"Aid and Development,"
MPRA Paper
13171, University Library of Munich, Germany.
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