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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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    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. 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.
    16. 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.
    17. 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.
    18. Susin, Scott, 2002. "Rent vouchers and the price of low-income housing," Journal of Public Economics, Elsevier, pages 109-152.
    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, pages 648-660.
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    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).
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    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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