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Empirical econometric evaluation of alternative methods of dealing with missing values in Investment Climate surveys

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  • Alvaro Escribano

    ()

  • Jorge Pena

    ()

Abstract

The Investment Climate surveys (ICSs) are valuable instruments which improve our understanding of the economic, social, political and institutional factors determining economic growth, particularly in emerging and transition economies. However, at the same time, they have to overcome some difficult issues related with the quality of the information provided; measurement errors, outlier observations and missing data are frequently found in this datasets. In this paper we discuss the applicability of recent procedures to deal with missing observations in IC surveys. In particular we present a simple replacement mechanism—for application in models with a large number of explanatory variables—, which we call the ICA method, which in turn is a proxy of two methods: multiple imputation and EM algorithm. We evaluate the performance of this ICA method in the context of TFP estimation in extended production functions using ICSs from four countries: India, South Africa, Tanzania and Turkey. We find that the ICA method is very robust and performs reasonably well even under different assumptions on the nature of the mechanism generating missing data.

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Bibliographic Info

Paper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we098750.

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Date of creation: Nov 2009
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Handle: RePEc:cte:werepe:we098750

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Keywords: Investment Climate surveys; Missing observations; Incomplete data; Random sampling; Sample selection; EM-algorithm and bootstrap;

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  1. Alvaro Escribano & J. Luis Guasch & Jorge Pena, 2009. "Assessing the impact of infrastructure quality on firm productivity in Africa: Cross-country comparisons based on investment climate surveys from 1999 to 2005," Economics Working Papers we098649, Universidad Carlos III, Departamento de Economía.
  2. Griliches, Zvi, 1986. "Economic data issues," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 3, chapter 25, pages 1465-1514 Elsevier.
  3. Alvaro Escribano & J. Luis Guasch & Manuel De Orte & Jorge Pena, 2008. "Investment climate assessment based on demean Olley and Pakes decompositions: methodology and application to Turkey's investment climate survey," Economics Working Papers we082012, Universidad Carlos III, Departamento de Economía.
  4. Cameron,A. Colin & Trivedi,Pravin K., 2005. "Microeconometrics," Cambridge Books, Cambridge University Press, number 9780521848053.
  5. Newey, Whitney K., 1984. "A method of moments interpretation of sequential estimators," Economics Letters, Elsevier, vol. 14(2-3), pages 201-206.
  6. Escribano, Alvaro & Guasch, J. Luis, 2005. "Assessing the impact of the investment climate on productivity using firm-level data : methodology and the cases of Guatemala, Honduras, and Nicaragua," Policy Research Working Paper Series 3621, The World Bank.
  7. Alvaro Escribano & J. Luis Guasch & Manuel De Orte & Jorge Pena, 2008. "Investment climate and firm’s economic performance: econometric methodology and application to Turkey's investment climate survey," Economics Working Papers we082113, Universidad Carlos III, Departamento de Economía.
  8. James J. Heckman, 1976. "The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 475-492 National Bureau of Economic Research, Inc.
  9. Alvaro Escribano & J. Luis Guasch, 2008. "Robust methodology for investment climate assessment on productivity: application to investment climate surveys from Central America," Economics Working Papers we081911, Universidad Carlos III, Departamento de Economía.
  10. J. G. Ibrahim & S. R. Lipsitz & M.-H. Chen, 1999. "Missing covariates in generalized linear models when the missing data mechanism is non-ignorable," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 61(1), pages 173-190.
  11. Pagan, Adrian, 1984. "Econometric Issues in the Analysis of Regressions with Generated Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 221-47, February.
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