A note on Measurement Error and Euler Equations: an Alternative to Log-Linear Approximations
AbstractEmpirical research based on panel data has to pay special attention to measurement errors. Utility maximization often yields nonlinear decision rules in which measurement errors enter in a multiplicative way. The usual strategy to deal with them consists of taking log-linear approximations of the equations to estímate. The expression to be estimated then includes a new error component and the estimators could be biased and inconsistent. We describe one particular parameterization that avoids linearizing the equation we want to estimate.
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Bibliographic InfoPaper provided by EconWPA in its series General Economics and Teaching with number 0312004.
Length: 7 pages
Date of creation: 15 Dec 2003
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Note: Type of Document - pdf; prepared on win2000; to print on Hewlett Packard Laserjet; pages: 7; figures: 0. UPF Working Paper # 31 Newer version published in Economics Letters
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Panel; Euler equations; Measurement error; GMM;
Find related papers by JEL classification:
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
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