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Unformatted text preview: If both (1) and (3) are true, the results are as expected (underestimated coeffs with large SEs). IV as a Solution to Mismeasurement: Caution The weak instruments problem can become ugly here, just as when IV is used for other sorts of endogeneity problems. Hahn and Hausman present a spec test – after estimating the model with 2SLS, do a 2SLS version of the reverse regression. Results should not differ much (otherwise the problem hasn’t been solved). Measurement Error in the LHS Variables: Probit and Logit If we have a binary dependent variable w/ measurement error (i.e. some people are misclassified), the results will be biased and inconsistent. Hausman and others provide some suggestions. Note: for the case where the LHS is mismeasured but continuous, we will have problems with quantile regression while OLS will remain unbiased....
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This note was uploaded on 01/10/2011 for the course ECON 7427 taught by Professor Hamersma during the Spring '06 term at University of Florida.
 Spring '06
 HAMERSMA

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