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Error Components in Grouped Data: Is It Ever Worth Weighting?

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  • Dickins, William T

Abstract

Researchers estimating models with grouped data typically weight each observation by the square root of group size assuming that the model error term in the individual data is independently and identically distributed so that the error in the grouped data is heteroskedastic with variance proportional to group size. I argue that individual error terms are likely to be correlated due to group specific error component so weighting by the square root of group size is inappropriate. Tests for the presence of group error components and methods for obtaining efficient estimates of the parameters and consistent estimates of their standard errors are presented. Copyright 1990 by MIT Press.

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  • Dickins, William T, 1990. "Error Components in Grouped Data: Is It Ever Worth Weighting?," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 328-333, May.
    • Handle: RePEc:tpr:restat:v:72:y:1990:i:2:p:328-33
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    5. Olivier Cadot & Jaime de Melo & Marcelo Olarreaga, 2015. "The Protectionist Bias of Duty Drawbacks: Evidence from Mercosur," World Scientific Book Chapters, in: Developing Countries in the World Economy, chapter 15, pages 359-380, World Scientific Publishing Co. Pte. Ltd..
    6. Olarreaga, Marcelo & Kee, Hiau Looi & Silva, Peri, 2003. "Market Access for Sale: Latin America's Lobbying for US Tariff Preferences," CEPR Discussion Papers 4077, C.E.P.R. Discussion Papers.
    7. Hansen, Christian B., 2007. "Generalized least squares inference in panel and multilevel models with serial correlation and fixed effects," Journal of Econometrics, Elsevier, vol. 140(2), pages 670-694, October.
    8. Robert A. Moffitt, 2000. "Welfare Benefits and Female Headship in U.S. Time Series," American Economic Review, American Economic Association, vol. 90(2), pages 373-377, May.
    9. Cadena, Brian C., 2014. "Recent immigrants as labor market arbitrageurs: Evidence from the minimum wage," Journal of Urban Economics, Elsevier, vol. 80(C), pages 1-12.
    10. Esteban Sanroma Melendez & Raul Ramos Lobo, 2003. "Wage curves for Spain. Evidence from the family budget survey," Working Papers in Economics 101, Universitat de Barcelona. Espai de Recerca en Economia.
    11. de Melo, Jaime & Cadot, Olivier & Olarreaga, Marcelo, 2000. "The Protectionist Bias of Duty Drawbacks and the New Regionalism," CEPR Discussion Papers 2559, C.E.P.R. Discussion Papers.
    12. Olarreaga, Marcelo & Soloaga, Isidro & Winters, Alan, 1999. "What's behind MERCOSUR's common external tariff?," Policy Research Working Paper Series 2231, The World Bank.
    13. Olesya Baker & Kevin Lang, 2013. "The Effect of High School Exit Exams on Graduation, Employment, Wages and Incarceration," NBER Working Papers 19182, National Bureau of Economic Research, Inc.
    14. Cadot, Olivier*de Melo, Jaime*Olarreaga, Marcelo, 2001. "Can duty-drawbacks have a protectionist bias? Evidence from MERCOSUR," Policy Research Working Paper Series 2523, The World Bank.
    15. Susin, Scott, 2002. "Rent vouchers and the price of low-income housing," Journal of Public Economics, Elsevier, vol. 83(1), pages 109-152, January.
    16. Carrell, Scott E., 2007. "The national internal labor market encounters the local labor market: Effects on employee retention," Labour Economics, Elsevier, vol. 14(5), pages 774-787, October.
    17. Pedro S. Martins & Gary Solon & Jonathan Thomas, 2010. "Measuring What Employers Really Do about Entry Wages over the Business Cycle," NBER Working Papers 15767, National Bureau of Economic Research, Inc.
    18. Ladd, Helen F., 1999. "The Dallas school accountability and incentive program: an evaluation of its impacts on student outcomes," Economics of Education Review, Elsevier, vol. 18(1), pages 1-16, February.
    19. Jeffrey A. Groen, 2005. "Occupation-Specific Human Capital and Local Labor Markets," Working Papers 376, U.S. Bureau of Labor Statistics.
    20. Donggyun Shin & Gary Solon, 2007. "New Evidence On Real Wage Cyclicality Within Employer–Employee Matches," Scottish Journal of Political Economy, Scottish Economic Society, vol. 54(5), pages 648-660, November.
    21. repec:pri:cheawb:adriana_estimationofmodels is not listed on IDEAS
    22. Kim, Taeyoon & Brorsen, B. Wade & Kenkel, Philip L., 2008. "Estimation of Efficiency with the Stochastic Frontier Cost Function and Heteroscedasticity: A Monte Carlo Study," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6408, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    23. Madani, Dorsati & Olarreaga, Marcelo, 2002. "Politically optimal tariffs : an application to Egypt," Policy Research Working Paper Series 2882, The World Bank.
    24. Bound, John & Groen, Jeffrey & Kezdi, G.Gabor & Turner, Sarah, 2004. "Trade in university training: cross-state variation in the production and stock of college-educated labor," Journal of Econometrics, Elsevier, vol. 121(1-2), pages 143-173.

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