Measurement error and imputation of consumption in survey data
AbstractWe study how estimators used to impute consumption in survey data are inconsistent due to measurement error in consumption. Previous research suggests instrumenting consumption to overcome this problem. We show that, if additional regressors are present in the estimation, then instrumenting consumption may still produce inconsistent estimators. This inconsistency arises from the likely correlation between those additional regressors and the measurement error, a correlation not directly observable. We propose an additional condition to be satisfied by the instrument that reduces and even eliminates measurement error bias in the presence of additional regressors. This condition is directly observable in the data.
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Bibliographic InfoPaper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we1219.
Date of creation: Jul 2012
Date of revision:
Consumption; Measurement error; Instrumental variables; Consumer expenditure survey; Panel study of income dynamics;
Find related papers by JEL classification:
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
- E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
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- Blundell, R & Pistaferri, L & Preston, I, 2004. "Imputing consumption in the PSID using food demand estimates from the CEX," Open Access publications from University College London http://discovery.ucl.ac.u, University College London.
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CEPR Discussion Papers
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- Erich Battistin & Mario Padula, 2010. "Survey Instruments and the Reports of Consumption Expenditures: Evidence from the Consumer Expenditure Surveys," CSEF Working Papers 259, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
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