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Using "Shares" vs. "Log of Shares" in Fixed-Effect Estimations

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  • Gerdes, Christer

    (SOFI, Stockholm University)

Abstract

This paper looks at potential implications emerging from including "shares" as a control variable in fixed effect estimations. By shares I refer to the ratio of a sum of units over another, such as the share of immigrants in a city or school. As will be shown in this paper, a logarithmic transformation of shares has some methodological merits as compared to the use of shares defined as mere ratios. In certain empirical settings the use of the latter might result in coefficient estimates that, spuriously, are statistically significant more often than they should.

Suggested Citation

  • Gerdes, Christer, 2010. "Using "Shares" vs. "Log of Shares" in Fixed-Effect Estimations," IZA Discussion Papers 5171, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp5171
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    Cited by:

    1. Trax, Michaela & Brunow, Stephan & Suedekum, Jens, 2015. "Cultural diversity and plant-level productivity," Regional Science and Urban Economics, Elsevier, vol. 53(C), pages 85-96.
    2. Azwardi Azwardi & Sukanto Sukanto & Alghifari Mahdi Igamo & Arika Kurniawan, 2021. "Carbon Emissions, Economic Growth, Forest, Agricultural Land and Air Pollution in Indonesia," International Journal of Energy Economics and Policy, Econjournals, vol. 11(4), pages 537-542.
    3. Andersson, Fredrik N.G. & Opper, Sonja & Khalid, Usman, 2018. "Are capitalists green? Firm ownership and provincial CO2 emissions in China," Energy Policy, Elsevier, vol. 123(C), pages 349-359.

    More about this item

    Keywords

    spurious significance; symmetry; Törnqvist index; consistency;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C29 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Other
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General

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