Michael P. Murray
The Bad, the Weak, and the Ugly: Avoiding the Pitfalls of Instrumental Variables Estimation
Abstract: Instrumental variables estimation can, in principle, avoid biases that ordinary least squares estimation suffers when explanatory variables are correlated with the disturbances. Finding appropriate instruments is a challenge. This paper uses nine recently published empirical papers to illustrate exemplary practices in IV estimation. Nine strategies for avoiding bad instruments (those correlated with the disturbances), as well as recently developed best practices for coping with weak instruments (those little correlated with the troublesome explanatory variable), are summarized and illustrated. The ugly interpretive perils posed by heterogeneity in agents’ behavioral responses to a troublesome explanator are also described and illustrated. All procedures recommended in the paper can be implemented using existing commands for one or more standard econometric packages.
The Bad, the Weak, and the Ugly: Avoiding the Pitfalls of Instrumental Variables Estimation (PDF)
Kathleen P. Bell
School of Economics
University of Maine
Space: A Worthy Frontier? Insights from environmental economics
Abstract: Interest in the spatial aspects of economic behavior has increased over the last decade. Bolstered by advances in theory, data, and computing, economists from numerous fields are increasingly stressing interactions, dependencies, and heterogeneity over space. Reflecting on recent spatial, micro-level environmental economics research, we discuss conceptual, empirical, and data issues involved in modeling the spatial aspects of economic behavior. Controlling for spatial effects in micro-level studies of consumer and producer behavior necessitates a range of analytical modifications ranging from modest changes in data collection and the definition of variables to dramatic changes in theoretical and empirical modeling of consumer and producer decision-making. As researchers explore the utility of such modifications, we are gaining valuable knowledge about the challenges and opportunities of increased recognition of the spatial aspects of economic behavior.
Thursday, October 7, at 4:00 p.m.
Shannon Room, Hubbard Hall
William D. Shipman Professor of Economics
“Estimating Models of Intergenerational Links in Health and Economic Status”
"Attrition in Models of Intergenerational Links in Health and Economic Status in the PSID " (PDF)
Abstract: Parental health and resources have significant impacts on the adult outcomes of children. Understanding the nature of intergenerational links in health and income is important in order to formulate appropriate policy. Estimation of the links requires strong data that permit individuals to be followed from childhood to adulthood and permit good controls for family background, neighborhood, and environment. The talk will review key issues in the estimation of these links, including the use of sibling differences as a method to control for unobserved family background differences. The talk will then discuss particular problems that sample attrition poses in the long panels used for these models. The long time frame required for this type of analysis means that selective attrition potentially biases results as the less healthy drop out. The talk will discuss tests for attrition bias in the Panel Study of Income Dynamics, a widely used survey with intergenerational data.
Thursday, September 16, at 4:00 p.m.
Shannon Room, Hubbard Hall.
The speaker is Robert Leeson of Stanford University
The Consumed Income Tax Structure: From Hobbes to Meade and Beyond
“The Case for a Consumed Income Tax Structure” (PDF)
Abstract: Economists typically oppose tariffs. Likewise, many economists oppose the income tax (where income is not defined to exclude savings) and have instead proposed variants of a consumed income tax structure (CITS): including Thomas Hobbes (1651), John Stuart Mill (1884), Irving Fisher (1906), Luigi Einaudi (1928-9), Milton Friedman (1943), Nicholas Kaldor (1955) and James Meade (1978).
This paper analyses and extends this tradition. In particular, it shows that a CITS can help tame the business cycle and tackle the problem of unfunded liabilities. It also demonstrates that historians of economic thought have a unique advantage in contemporary public policy disputes. Historians can transcend current prejudices and can offer perspectives on policy that are grounded in traditions that would be largely mysterious to those unfamiliar with the associated literature.
A second paper for possible discussion, is titled “A Market Based Automatic Intermediary Stabilization Mechanism” (PDF)