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Spurious Weather Effects

Author

Listed:
  • Jo Thori Lind

Abstract

Rainfall is a truly exogeneous variable and hence popular as an instrument for many outcomes. But by its very nature, rainfall in nearby areas tends to be correlated. I show theoretically that if there are also spatial trends in outcomes of interest, this may create spurious correlation. In panel data models where fixed features can be dummied out, the same problem can occur if time trends are spatially dependent. Using Monte Carlo analysis, I show that standard tests can reject true null hypotheses in up to 99% of cases. I also show that this feature is present in a study of the effect of precipitation on electoral turnout in Norway. Using precipitation on non-election days, I show that the distribution of parameter estimates is far away from the theoretical distribution. To solve the problem, I suggest controlling for spatial and spatio-temporal trends using multi-dimensional polynomial approximations.

Suggested Citation

  • Jo Thori Lind, 2015. "Spurious Weather Effects," CESifo Working Paper Series 5365, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_5365
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    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp5365.pdf
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    References listed on IDEAS

    as
    1. Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100711, January.
    2. Lo Prete, Anna & Revelli, Federico, 2014. "Voter Turnout and City Performance," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201435, University of Turin.
    3. Marie Connolly, 2008. "Here Comes the Rain Again: Weather and the Intertemporal Substitution of Leisure," Journal of Labor Economics, University of Chicago Press, vol. 26, pages 73-100.
    4. Andreas Madestam & Daniel Shoag & Stan Veuger & David Yanagizawa-Drott, 2013. "Do Political Protests Matter? Evidence from the Tea Party Movement," The Quarterly Journal of Economics, Oxford University Press, vol. 128(4), pages 1633-1685.
    5. Peter Kurrild-Klitgaard, 2013. "It’s the weather, stupid! Individual participation in collective May Day demonstrations," Public Choice, Springer, vol. 155(3), pages 251-271, June.
    6. Joshua Graff Zivin & Solomon M. Hsiang & Matthew Neidell, 2018. "Temperature and Human Capital in the Short and Long Run," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 5(1), pages 77-105.
    7. Alessandro Sforza, 2014. "The Weather Effect: estimating the effect of voter turnout on electoral outcomes in Italy," Working Papers w201405, Banco de Portugal, Economics and Research Department.
    8. Guven, Cahit & Hoxha, Indrit, 2015. "Rain or shine: Happiness and risk-taking," The Quarterly Review of Economics and Finance, Elsevier, vol. 57(C), pages 1-10.
    9. repec:cup:apsrev:v:104:y:2010:i:02:p:268-288_00 is not listed on IDEAS
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    More about this item

    Keywords

    rainfall; spurious correlation; spatial correlation; Legendre polynomial;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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