IDEAS home Printed from https://ideas.repec.org/p/iza/izadps/dp16508.html
   My bibliography  Save this paper

Embrace the Noise: It Is OK to Ignore Measurement Error in a Covariate, Sometimes

Author

Listed:
  • Dong, Hao

    (Southern Methodist University)

  • Millimet, Daniel L.

    (Southern Methodist University)

Abstract

In linear regression models, measurement error in a covariate causes Ordinary Least Squares (OLS) to be biased and inconsistent. Instrumental Variables (IV) is a common solution. While IV is also biased, it is consistent. Here, we undertake an asymptotic comparison of OLS and IV in the case where a covariate is mismeasured for [Nδ] of N observations with δ ∊ [0, 1]. We show that OLS is consistent for δ

Suggested Citation

  • Dong, Hao & Millimet, Daniel L., 2023. "Embrace the Noise: It Is OK to Ignore Measurement Error in a Covariate, Sometimes," IZA Discussion Papers 16508, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp16508
    as

    Download full text from publisher

    File URL: https://docs.iza.org/dp16508.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. David S. Lee & Justin McCrary & Marcelo J. Moreira & Jack Porter, 2022. "Valid t-Ratio Inference for IV," American Economic Review, American Economic Association, vol. 112(10), pages 3260-3290, October.
    2. Cawley, John & Maclean, Johanna Catherine & Hammer, Mette & Wintfeld, Neil, 2015. "Reporting error in weight and its implications for bias in economic models," Economics & Human Biology, Elsevier, vol. 19(C), pages 27-44.
    3. Millimet, Daniel L., 2015. "Covariate measurement and endogeneity," Economics Letters, Elsevier, vol. 136(C), pages 59-63.
    4. Wada, Roy & Tekin, Erdal, 2010. "Body composition and wages," Economics & Human Biology, Elsevier, vol. 8(2), pages 242-254, July.
    5. John Cawley & Markus M. Grabka & Dean R. Lillard, 2005. "A Comparison of the Relationship between Obesity and Earnings in the U.S. and Germany," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 125(1), pages 119-129.
    6. Joshua Graff Zivin & Matthew Neidell, 2013. "Environment, Health, and Human Capital," Journal of Economic Literature, American Economic Association, vol. 51(3), pages 689-730, September.
    7. Edward C. Norton & Euna Han, 2008. "Genetic information, obesity, and labor market outcomes," Health Economics, John Wiley & Sons, Ltd., vol. 17(9), pages 1089-1104, September.
    8. M. Hashem Pesaran & Qiankun Zhou, 2018. "To Pool or Not to Pool: Revisited," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 80(2), pages 185-217, April.
    9. Susanne M. Schennach, 2016. "Recent Advances in the Measurement Error Literature," Annual Review of Economics, Annual Reviews, vol. 8(1), pages 341-377, October.
    10. Donal O’Neill & Olive Sweetman, 2013. "The consequences of measurement error when estimating the impact of obesity on income," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-20, December.
    11. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
    12. Euna Han & Edward C. Norton & Sally C. Stearns, 2009. "Weight and wages: fat versus lean paychecks," Health Economics, John Wiley & Sons, Ltd., vol. 18(5), pages 535-548, May.
    13. Maximilian Auffhammer, 2018. "Quantifying Economic Damages from Climate Change," Journal of Economic Perspectives, American Economic Association, vol. 32(4), pages 33-52, Fall.
    14. John Cawley, 2004. "The Impact of Obesity on Wages," Journal of Human Resources, University of Wisconsin Press, vol. 39(2).
    15. Brendan Kline & Justin L. Tobias, 2008. "The wages of BMI: Bayesian analysis of a skewed treatment-response model with nonparametric endogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 23(6), pages 767-793.
    16. Lindeboom, Maarten & Lundborg, Petter & van der Klaauw, Bas, 2010. "Assessing the impact of obesity on labor market outcomes," Economics & Human Biology, Elsevier, vol. 8(3), pages 309-319, December.
    17. Atella, Vincenzo & Pace, Noemi & Vuri, Daniela, 2008. "Are employers discriminating with respect to weight?: European Evidence using Quantile Regression," Economics & Human Biology, Elsevier, vol. 6(3), pages 305-329, December.
    18. Greve, Jane, 2008. "Obesity and labor market outcomes in Denmark," Economics & Human Biology, Elsevier, vol. 6(3), pages 350-362, December.
    19. Isaiah Andrews & James H. Stock & Liyang Sun, 2019. "Weak Instruments in Instrumental Variables Regression: Theory and Practice," Annual Review of Economics, Annual Reviews, vol. 11(1), pages 727-753, August.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kinge, Jonas Minet, 2016. "Waist circumference, body mass index and employment outcomes," HERO Online Working Paper Series 2016:4, University of Oslo, Health Economics Research Programme.
    2. Jonas Minet Kinge, 2017. "Waist circumference, body mass index, and employment outcomes," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 18(6), pages 787-799, July.
    3. Kinge, Jonas Minet, 2016. "Body mass index and employment status: A new look," Economics & Human Biology, Elsevier, vol. 22(C), pages 117-125.
    4. Chu, Filmer & Ohinmaa, Arto, 2016. "The obesity penalty in the labor market using longitudinal Canadian data," Economics & Human Biology, Elsevier, vol. 23(C), pages 10-17.
    5. Kinge, Jonas Minet, 2015. "Body mass index and employment status: a new look," HERO Online Working Paper Series 2015:3, University of Oslo, Health Economics Research Programme.
    6. Sabia, Joseph J. & Rees, Daniel I., 2012. "Body weight and wages: Evidence from Add Health," Economics & Human Biology, Elsevier, vol. 10(1), pages 14-19.
    7. Groves, Jeremy & Wilcox, Virginia, 2023. "The impact of overweight and obesity on unemployment duration among young American workers," Economics & Human Biology, Elsevier, vol. 51(C).
    8. Pekkurnaz, Didem, 2023. "Causal effect of obesity on the probability of employment in women in Turkey," Economics & Human Biology, Elsevier, vol. 51(C).
    9. Nuñez, Roy, 2020. "Obesity and labor market in Peru," MPRA Paper 105621, University Library of Munich, Germany.
    10. Caliendo, Marco & Gehrsitz, Markus, 2016. "Obesity and the labor market: A fresh look at the weight penalty," Economics & Human Biology, Elsevier, vol. 23(C), pages 209-225.
    11. Margareta Dackehag & Ulf-G. Gerdtham & Martin Nordin, 2015. "Productivity or discrimination? An economic analysis of excess-weight penalty in the Swedish labor market," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 16(6), pages 589-601, July.
    12. Larose, Samantha L. & Kpelitse, Koffi A. & Campbell, M. Karen & Zaric, Gregory S. & Sarma, Sisira, 2016. "Does obesity influence labour market outcomes among working-age adults? Evidence from Canadian longitudinal data," Economics & Human Biology, Elsevier, vol. 20(C), pages 26-41.
    13. Petri Böckerman & John Cawley & Jutta Viinikainen & Terho Lehtimäki & Suvi Rovio & Ilkka Seppälä & Jaakko Pehkonen & Olli Raitakari, 2019. "The effect of weight on labor market outcomes: An application of genetic instrumental variables," Health Economics, John Wiley & Sons, Ltd., vol. 28(1), pages 65-77, January.
    14. Mosca, Irene, 2013. "Body mass index, waist circumference and employment: Evidence from older Irish adults," Economics & Human Biology, Elsevier, vol. 11(4), pages 522-533.
    15. Mosca, Irene, 2012. "Obesity and Employment in Ireland: Moving Beyond BMI," Papers WP431, Economic and Social Research Institute (ESRI).
    16. Cawley, John & Han, Euna & Norton, Edward C., 2009. "Obesity and labor market outcomes among legal immigrants to the United States from developing countries," Economics & Human Biology, Elsevier, vol. 7(2), pages 153-164, July.
    17. Christina Hansen Edwards & Johan Håkon Bjørngaard & Jonas Minet Kinge, 2021. "The relationship between body mass index and income: Using genetic variants from HUNT as instrumental variables," Health Economics, John Wiley & Sons, Ltd., vol. 30(8), pages 1933-1949, August.
    18. Nathalie Mathieu‐Bolh, 2022. "The elusive link between income and obesity," Journal of Economic Surveys, Wiley Blackwell, vol. 36(4), pages 935-968, September.
    19. Pagan, Ricardo & Haro, Carmen Ordóñez de & Sánchez, Carlos Rivas, 2016. "Obesity, job satisfaction and disability at older ages in Europe," Economics & Human Biology, Elsevier, vol. 20(C), pages 42-54.
    20. Susan Averett & Laura Argys & Jennifer Kohn, 2012. "Immigration, obesity and labor market outcomes in the UK," IZA Journal of Migration and Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 1(1), pages 1-19, December.

    More about this item

    Keywords

    errors-in-variables; measurement error; asymptotics;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp16508. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Holger Hinte (email available below). General contact details of provider: https://edirc.repec.org/data/izaaade.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.