A note on the estimation of linear regression models with Heteroskedastic measurement errors
I consider the estimation of linear regression models when the independent variables are measured with errors whose variances differ across observations, a situation that arises, for example, when the explanatory variables in a regression model are estimates of population parameters based on samples of varying sizes. Replacing the error variance that is assumed common to all observations in the standard errors-in-variables estimator by the mean measurement error variance yields a consistent estimator in the case of measurement error heteroskedasticity. However, another estimator, which I call the Heteroskedastic Errors in Variables Estimator (HEIV), is, under standard assumptions, asymptotically more efficient. Simulations show that the efficiency gains are likely to appreciable in practice. In addition, the HEIV estimator, which is equal to the ordinary least squares regression of the dependent variable on the best linear predictor of the true independent variables, is simple to compute with standard regression software.
|Date of creation:||2001|
|Date of revision:|
|Contact details of provider:|| Postal: P.O. Box 834, 230 South LaSalle Street, Chicago, Illinois 60690-0834|
Web page: http://www.chicagofed.org/
More information through EDIRC
|Order Information:|| Web: http://www.chicagofed.org/webpages/publications/print_publication_order_form.cfm Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- David Card & Dean Hyslop, 1996.
"Does Inflation "Grease the Wheels of the Labor Market"?,"
NBER Working Papers
5538, National Bureau of Economic Research, Inc.
- David Card & Dean Hyslop, 1997. "Does Inflation "Grease the Wheels of the Labor Market"?," NBER Chapters, in: Reducing Inflation: Motivation and Strategy, pages 71-122 National Bureau of Economic Research, Inc.
- Blanchflower, D. & Oswald, A., 1989.
"The Wage Curve,"
340, London School of Economics - Centre for Labour Economics.
- Christina D. Romer & David H. Romer, 1997. "Reducing Inflation: Motivation and Strategy," NBER Books, National Bureau of Economic Research, Inc, number rome97-1.
- Blanchard, O & Katz, L, 1996.
"What We Know and Do Not Know about the Natural Rate of Unemployment,"
96-29, Massachusetts Institute of Technology (MIT), Department of Economics.
- Olivier Blanchard & Lawrence F. Katz, 1997. "What We Know and Do Not Know about the Natural Rate of Unemployment," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 51-72, Winter.
- Olivier Blanchard & Lawrence F. Katz, 1996. "What We Know and Do Not Know About the Natural Rate of Unemployment," NBER Working Papers 5822, National Bureau of Economic Research, Inc.
- White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
- Daniel Aaronson & Daniel G. Sullivan, 1999. "Worker insecurity and aggregate wage growth," Working Paper Series WP-99-30, Federal Reserve Bank of Chicago.
When requesting a correction, please mention this item's handle: RePEc:fip:fedhwp:wp-01-23. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bernie Flores)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.