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Iatrogenic Specification Error: A Cautionary Tale of Cleaning Data

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  • Christopher R. Bollinger

    (University of Kentucky)

  • Amitabh Chandra

    (Dartmouth College, Institute for the Study of Labor (Bonn), and National Bureau of Economic Research)

Abstract

It is common practice to use sensible rules of thumb for cleaning data. Measurement error is often the justification for removing (trimming) or recoding (winsorizing) observations where the dependent variable has values that lie outside a specified range. We consider a general measurement error process that nests many plausible models. Analytic results demonstrate that winsorizing and trimming are solutions for a narrow class of error processes. Indeed such procedures can induce or exacerbate bias. Monte Carlo simulations and empirical results demonstrate the fragility of cleaning. Even on root mean square error criteria, we cannot find generalizable justifications for these procedures.

Suggested Citation

  • Christopher R. Bollinger & Amitabh Chandra, 2005. "Iatrogenic Specification Error: A Cautionary Tale of Cleaning Data," Journal of Labor Economics, University of Chicago Press, vol. 23(2), pages 235-258, April.
    • Handle: RePEc:ucp:jlabec:v:23:y:2005:i:2:p:235-258
    DOI: 10.1086/428028
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    References listed on IDEAS

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    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • J1 - Labor and Demographic Economics - - Demographic Economics

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