IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Testing for a common latent variable in a linear regression

  • Wittenberg, Martin

We present a test of the hypothesis that a subset of the regressors are all proxying for the same latent variable. This issue will be of interest in cases where there are several correlated measures of elusive concepts such as misgovernance or corruption; in analyses where key variables such as income are not measured at all and one is forced to rely on various proxies; and where the key regressors are badly measured and one is trying to extract a stronger signal from the regression by adding additional proxies as suggested by Lubotsky and Wittenberg (2006). We apply this test in three contexts, each characterised by a different estimation challenge arising from data limitations. We reexamine Mauro's (1995) use of three institutional quality measures in his study of corruption and growth. Here several variables, each potentially measured with error, may all be proxies for a single factor: the quality of governance. Our test suggests that the latent variable is driven primarily by the “red tape” measure, rather than the “corruption” variable on which Mauro focuses. Secondly, we look at the correlates of body mass among black South African women. The key variable of interest, namely “wealth” is not measured at all. Consequently we construct an index from a series of asset variables as suggested by Filmer and Pritchett (2001). Our test shows that some assets have independent impacts on the dependent variable. Once this is recognised the “asset index” comes apart. Finally we analyse the determinants of sleep among young South Africans. The income variable in the survey is badly measured and we supplement it with asset proxies. The test again suggests that some assets are not proxying for the badly measured income variable. We can nevertheless get a substantially stronger signal on the income variable.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://mpra.ub.uni-muenchen.de/2550/1/MPRA_paper_2550.pdf
File Function: original version
Download Restriction: no

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 2550.

as
in new window

Length:
Date of creation: 31 Mar 2007
Date of revision:
Handle: RePEc:pra:mprapa:2550
Contact details of provider: Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page: http://mpra.ub.uni-muenchen.de

More information through EDIRC

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.:

as in new window
  1. Anne Case & Angus Deaton, 2005. "Health and wealth among the poor: India and South Africa compared," Working Papers 169, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
  2. Darren Lubotsky & Martin Wittenberg, 2006. "Interpretation of Regressions with Multiple Proxies," The Review of Economics and Statistics, MIT Press, vol. 88(3), pages 549-562, August.
  3. Daron Acemoglu & Simon Johnson & James A. Robinson, 2000. "The Colonial Origins of Comparative Development: An Empirical Investigation," NBER Working Papers 7771, National Bureau of Economic Research, Inc.
  4. Biddle, Jeff E & Hamermesh, Daniel S, 1990. "Sleep and the Allocation of Time," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 922-43, October.
  5. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
  6. Fedderke, Johannes & Klitgaard, Robert, 1998. "Economic Growth and Social Indicators: An Exploratory Analysis," Economic Development and Cultural Change, University of Chicago Press, vol. 46(3), pages 455-89, April.
  7. Filmer, Deon & Pritchett, Lant, 1998. "Estimating wealth effects without expenditure data - or tears : with an application to educational enrollments in states of India," Policy Research Working Paper Series 1994, The World Bank.
  8. Szalontai, Gabor, 2006. "The demand for sleep: A South African study," Economic Modelling, Elsevier, vol. 23(5), pages 854-874, September.
  9. Barry P. Bosworth & Susan M. Collins, 2003. "The Empirics of Growth: An Update," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(2), pages 113-206.
  10. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:2550. 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: (Ekkehart Schlicht)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.