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Iatrogenic Specification Error: A Cautionary Tale of Cleaning Data

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  • Christopher R. Bollinger
  • Amitabh Chandra

Abstract

It is common in empirical research to use what appear to be sensible rules of thumb for cleaning data. Measurement error is often the justification for removing (trimming) or recoding (winsorizing) observations whose values lie outside a specified range. This paper considers identification in a linear model when the dependent variable is mismeasured. The results examine the common practice of trimming and winsorizing to address the identification failure. In contrast to the physical and laboratory sciences, measurement error in social science data is likely to be more complex than simply additive white noise. We consider a general measurement error process which nests many processes including the additive white noise process and a contaminated sampling process. Analytic results are only tractable under strong distributional assumptions, but demonstrate that winsorizing and trimming are only solutions for a particular class of measurement error processes. Indeed, trimming and winsorizing may induce or exacerbate bias. We term this source of bias Iatrogenic' (or econometrician induced) error. The identification results for the general error process highlight other approaches which are more robust to distributional assumptions. Monte Carlo simulations demonstrate the fragility of trimming and winsorizing as solutions to measurement error in the dependent variable.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Technical Working Papers with number 0289.

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Date of creation: Mar 2003
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Handle: RePEc:nbr:nberte:0289

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  1. Bollinger, Christopher R, 1998. "Measurement Error in the Current Population Survey: A Nonparametric Look," Journal of Labor Economics, University of Chicago Press, vol. 16(3), pages 576-94, July.
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  8. Bound, John & Krueger, Alan B, 1991. "The Extent of Measurement Error in Longitudinal Earnings Data: Do Two Wrongs Make a Right?," Journal of Labor Economics, University of Chicago Press, vol. 9(1), pages 1-24, January.
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  10. Marco Manacorda, 2004. "Can the Scala Mobile Explain the Fall and Rise of Earnings Inequality in Italy? A Semiparametric Analysis, 19771993," Journal of Labor Economics, University of Chicago Press, vol. 22(3), pages 585-614, July.
  11. Horowitz, Joel L & Manski, Charles F, 1995. "Identification and Robustness with Contaminated and Corrupted Data," Econometrica, Econometric Society, vol. 63(2), pages 281-302, March.
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Cited by:
  1. Lee, Nayoung & Moon, Hyungsik Roger & Weidner, Martin, 2012. "Analysis of interactive fixed effects dynamic linear panel regression with measurement error," Economics Letters, Elsevier, vol. 117(1), pages 239-242.
  2. Harley Frazis & Mark A Loewenstein, 2006. "Wage Compression and the Division of Returns to Productivity Growth: Evidence from EOPP," Working Papers 398, U.S. Bureau of Labor Statistics.
  3. Lozano, Fernando A., 2012. "What Happened to God's Time? The Evolution of Secularism and Hours of Work in America, Evidence from Religious Holidays," IZA Discussion Papers 6552, Institute for the Study of Labor (IZA).
  4. Elizabeth Asiedu & James Freeman, 2008. "The Effect of Corruption on Investment Growth: Evidence from Firms in Latin America, Sub-Saharan Africa and Transition Countries," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 200802, University of Kansas, Department of Economics.
  5. Narayana R. Kocherlakota & Luigi Pistaferri, 2007. "Asset Pricing Implications of Pareto Optimality with Private Information," Levine's Bibliography 321307000000000701, UCLA Department of Economics.
  6. Puja Vasudeva Dutta, 2006. "Returns to Education: New Evidence for India, 1983-1999," Education Economics, Taylor and Francis Journals, vol. 14(4), pages 431-451.
  7. Maliranta, Mika & Ilmakunnas, Pekka, 2005. "Decomposing productivity and wage effects of intra-establishment labor restructuring," Discussion Papers 993, The Research Institute of the Finnish Economy.
  8. Barry Reilly & Puja Vasudeva Dutta, 2005. "The Gender Pay Gap and Trade Liberalisation: Evidence for India," PRUS Working Papers 32, Poverty Research Unit at Sussex, University of Sussex.
  9. Djavad Salehi-Isfahani & Insan Tunali & Ragui Assaad, 2009. "A comparative study of returns to education of urban men in Egypt, Iran, and Turkey," Working Papers e07-17, Virginia Polytechnic Institute and State University, Department of Economics.

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