Spurious Weather Effects
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.
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- 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.
- Stan Veuger & Daniel Shoag & Andreas Madestam & David Yanagizawa-Drott, 2012. "Do political protests matter? Evidence from the Tea Party movement," AEI Economics Working Papers 2786, American Enterprise Institute.
- Madestam, A. & Shoag, Daniel W & Veuger, S. & Yanagizawa-Drott, David Hans, 2013. "Do Political Protests Matter? Evidence from the Tea Party Movement," Scholarly Articles 13457753, Harvard Kennedy School of Government.
- Joshua S. Graff Zivin & Solomon M. Hsiang & Matthew J. Neidell, 2015. "Temperature and Human Capital in the Short- and Long-Run," NBER Working Papers 21157, National Bureau of Economic Research, Inc.
- 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.
- Kurrild-Klitgaard, Peter, 2010. "It’s the weather, stupid! Individual participation in collective May Day demonstrations," MPRA Paper 27891, University Library of Munich, Germany.
- Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100711, December.
- 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.
- Anna Lo Prete & Federico Revelli, 2014. "Voter Turnout and City Performance," Working papers 10, Società Italiana di Economia Pubblica.
- 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.
- 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.
- 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. Full references (including those not matched with items on IDEAS)
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