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An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Units
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The authors illustrates the danger of spurious regression from this kind of misspecification, using as an example a wage regression estimated on data for individual workers that includes in the specification aggregate regressors for characteristics of geographical states.Abstract:
Many economic researchers have attempted to measure the effect of aggregate market or public policy variables on micro units by merging aggregate data with micro observations by industry, occupation, or geographical location, then using multiple regression or similar statistical models to measure the effect of the aggregate variable on the micro units. The methods are usually based upon the assumption of independent disturbances, which is typically not appropriate for data from populations with grouped structure. Incorrectly using ordinary least squares can lead to standard errors that are seriously biased downward. This note illustrates the danger of spurious regression from this kind of misspecification, using as an example a wage regression estimated on data for individual workers that includes in the specification aggregate regressors for characteristics of geographical states. Copyright 1990 by MIT Press.read more
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References
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Journal ArticleDOI
Regression models for grouped populations in cross-section surveys
D. Pfeffermann,T. M. F. Smith +1 more
TL;DR: In this article, the authors examined how population grouping could affect a regression analysis of survey data and provided evidence for the need to take account of grouping when fitting regression models, and the assumptions underlying various models were compared and appropriate estimators derived.
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Affirmative Action and Opportunity: A Study of Female Quit Rates
TL;DR: In this paper, the effectiveness of affirmative action efforts has been a topic of some controversy and the literature is unclear about whether women and/or minorities benefit from affirmative action programs, while some individuals benefit, there is considerable controversy about the gains for target groups as a whole.