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Improved Errors-in-Variables Estimators for Grouped Data

  • Paul J Devereux

    (University College of Dublin)

Grouping models are widely used in economics but are subject to finite sample bias. I show that the standard errors-in-variables estimator (EVE) is exactly equivalent to the Jackknife Instrumental Variables Estimator (JIVE), and use this relationship to develop an estimator which, unlike EVE, is unbiased in finite samples. The theoretical results are demonstrated using Monte Carlo experiments. Finally, I implement a model of intertemporal male labor supply using microdata from the United States Census. There are sizeable differences in the wage elasticity across estimators, showing the practical importance of the theoretical issues even when the sample size is quite large.

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File URL: http://www.ucd.ie/economics/research/papers/2006/WP06.02.pdf
File Function: First version, 2006
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Paper provided by School of Economics, University College Dublin in its series Working Papers with number 200602.

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Length: 34 pages
Date of creation: 21 Jan 2006
Date of revision:
Handle: RePEc:ucn:wpaper:200602
Contact details of provider: Postal: UCD, Belfield, Dublin 4
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Web page: http://www.ucd.ie/economics

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  1. Nijman, T.E. & Verbeek, M.J.C.M., 1993. "Minimum MSE estimation of a regression model with fixed effects from a series of cross sections," Other publications TiSEM 34c1104a-a64b-4030-be99-b, Tilburg University, School of Economics and Management.
  2. Verbeek, Marno & Nijman, Theo, 1993. "Minimum MSE estimation of a regression model with fixed effects from a series of cross-sections," Journal of Econometrics, Elsevier, vol. 59(1-2), pages 125-136, September.
  3. Altonji, Joseph G, 1986. "Intertemporal Substitution in Labor Supply: Evidence from Micro Data," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S176-S215, June.
  4. Angrist, Joshua D., 1991. "Grouped-data estimation and testing in simple labor-supply models," Journal of Econometrics, Elsevier, vol. 47(2-3), pages 243-266, February.
  5. Donald, Stephen G. & Whitney Newey, 1999. "Choosing the Number of Instruments," Working papers 99-05, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Dolores Collado, M., 1997. "Estimating dynamic models from time series of independent cross-sections," Journal of Econometrics, Elsevier, vol. 82(1), pages 37-62.
  7. David Card & Thomas Lemieux, 1993. "Wage Dispersion, Returns to Skill, and Black-White Wage Differentials," NBER Working Papers 4365, National Bureau of Economic Research, Inc.
  8. Daniel A. Ackerberg & Paul J. Devereux, 2009. "Improved JIVE Estimators for Overidentified Linear Models with and without Heteroskedasticity," The Review of Economics and Statistics, MIT Press, vol. 91(2), pages 351-362, May.
  9. Paul J. Devereux, 2007. "Small-sample bias in synthetic cohort models of labor supply," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(4), pages 839-848.
  10. Daron Acemoglu & Jorn-Steffen Pischke, 2001. "Changes in the wage structure, family income, and children's education," LSE Research Online Documents on Economics 2471, London School of Economics and Political Science, LSE Library.
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  12. Jacques Mairesse & Nathalie Greenan, 1999. "Using Employee Level Data in a Firm Level Econometric Study," NBER Working Papers 7028, National Bureau of Economic Research, Inc.
  13. Joshua D. Angrist & Alan B. Krueger, 1990. "Does Compulsory School Attendance Affect Schooling and Earnings?," NBER Working Papers 3572, National Bureau of Economic Research, Inc.
  14. Joshua D. Angrist & Guido W. Imbens & Alan Krueger, 1995. "Jackknife Instrumental Variables Estimation," NBER Technical Working Papers 0172, National Bureau of Economic Research, Inc.
  15. Angrist, Joshua D, 1990. "Lifetime Earnings and the Vietnam Era Draft Lottery: Evidence from Social Security Administrative Records," American Economic Review, American Economic Association, vol. 80(3), pages 313-36, June.
  16. Paul J. Devereux, 2004. "Changes in Relative Wages and Family Labor Supply," Journal of Human Resources, University of Wisconsin Press, vol. 39(3).
  17. Richard Blundell & Alan Duncan & Costas Meghir, 1998. "Estimating Labor Supply Responses Using Tax Reforms," Econometrica, Econometric Society, vol. 66(4), pages 827-862, July.
  18. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
  19. Blomquist, Soren & Dahlberg, Matz, 1999. "Small Sample Properties of LIML and Jackknife IV Estimators: Experiments with Weak Instruments," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(1), pages 69-88, Jan.-Feb..
  20. David J. McKenzie, 2001. "Consumption Growth in a Booming Economy: Taiwan 1976-96," Working Papers 823, Economic Growth Center, Yale University.
  21. Phillips, Garry D A & Hale, C, 1977. "The Bias of Instrumental Variable Estimators of Simultaneous Equation Systems," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(1), pages 219-28, February.
  22. Deaton, Angus, 1985. "Panel data from time series of cross-sections," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 109-126.
  23. Browning, Martin & Deaton, Angus & Irish, Margaret, 1985. "A Profitable Approach to Labor Supply and Commodity Demands over the Life-Cycle," Econometrica, Econometric Society, vol. 53(3), pages 503-43, May.
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