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Multicollinearity in the Presence of Errors-in-Variables Can Increase the Probability of Type-I Error

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  • John Komlos

Abstract

Multicollinearity, in combination with errors-in-variables, can increase the likelihood of a Type-I error by inflating the value of the estimated coefficients by more than it magnifies their standard errors, thereby increasing the likelihood of obtaining statistically significant results. This anomalous result may be caused by an interaction effect between errors-in-variables and multicollinearity.

Suggested Citation

  • John Komlos, 2020. "Multicollinearity in the Presence of Errors-in-Variables Can Increase the Probability of Type-I Error," Journal of Economics and Econometrics, Economics and Econometrics Society, vol. 63(1), pages 1-17.
    • Handle: RePEc:eei:journl:v:63:y:2020:i:1:p:1-17
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    Cited by:

    1. Thomas B. Marvell, 2025. "A Test for Endogeneity in Regressions," EERI Research Paper Series EERI RP 2025/05, Economics and Econometrics Research Institute (EERI), Brussels.

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    JEL classification:

    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure

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