(BQ) Part 1 book Econometric analysis has contents: Econometrics, the linear regression model, least squares, the least squares estimator, hypothesis tests and model selection, hypothesis tests and model selection, endogeneity and instrumental variable estimation, the generalized regression model and heteroscedasticity,...and other contents.
Trang 3SEVENTH EDITIONECONOMETRIC ANALYSIS
Q
William H Greene
New York University
Prentice Hall
Trang 4For Margaret and Richard Greene
Editorial Project Manager: Jill Kolongowski Associate Production Project Manager:
Credits and acknowledgments for material borrowed from other sources and reproduced, withpermission, in this textbook appear on appropriate page within text
Copyright © 2012 Pearson Education, Inc., publishing as Prentice Hall, One Lake Street, UpperSaddle River, NJ 07458 All rights reserved Manufactured in the United States of America Thispublication is protected by Copyright, and permission should be obtained from the publisher prior toany prohibited reproduction, storage in a retrieval system, or transmission in any form or by anymeans, electronic, mechanical, photocopying, recording, or likewise To obtain permission(s) to usematerial from this work, please submit a written request to Pearson Education, Inc., PermissionsDepartment, 501 Boylston Street, Suite 900, Boston, MA 02116, fax your request to 617-671-3447, ore-mail at http://www.pearsoned.com/legal/permission.htm
Many of the designations by manufacturers and seller to distinguish their products are claimed astrademarks Where those designations appear in this book, and the publisher was aware of a
trademark claim, the designations have been printed in initial caps or all caps
Library of Congress Cataloging-in-Publication Data
Trang 5The Economics of Women,
Men and Work
Russian and Soviet Economic
Performance and Structure
Women and the Economy:
Family, Work, and Pay
Macroeconomics: Policy and Practice*
Trang 6Chapter 2 The Linear Regression Model 11
Chapter 4 The Least Squares Estimator 51
Chapter 5 Hypothesis Tests and Model Selection 108
Chapter 6 Functional Form and Structural Change 149
Chapter 7 Nonlinear, Semiparametric, and Nonparametric
Regression Models 181Chapter 8 Endogeneity and Instrumental Variable Estimation 219
Part II Generalized Regression Model and Equation Systems
Chapter 9 The Generalized Regression Model and Heteroscedasticity 257Chapter 10 Systems of Equations 290
Chapter 11 Models for Panel Data 343
Part III Estimation Methodology
Chapter 12 Estimation Frameworks in Econometrics 432
Chapter 13 Minimum Distance Estimation and the Generalized
Chapter 14 Maximum Likelihood Estimation 509
Chapter 15 Simulation-Based Estimation and Inference and Random
Chapter 16 Bayesian Estimation and Inference 655
Part IV Cross Sections, Panel Data, and Microeconometrics
Chapter 17 Discrete Choice 681
Chapter 18 Discrete Choices and Event Counts 760
Chapter 19 Limited Dependent Variables—Truncation, Censoring,
and Sample Selection 833
iv
Trang 7Part V Time Series and Macroeconometrics
Chapter 20 Serial Correlation 903
Chapter 21 Nonstationary Data 942
Part VI Appendices
Appendix A Matrix Algebra 973
Appendix B Probability and Distribution Theory 1015
Appendix C Estimation and Inference 1047
Appendix D Large-Sample Distribution Theory 1066
Appendix E Computation and Optimization 1089
Appendix F Data Sets Used in Applications 1109
Combined Author and Subject Index 1161
Trang 81.2 The Paradigm of Econometrics 1
1.3 The Practice of Econometrics 3
1.6 Preliminaries 9
1.6.1 Numerical Examples 9 1.6.2 Software and Replication 9 1.6.3 Notational Conventions 9
CHAPTER 2 The Linear Regression Model 11
2.2 The Linear Regression Model 12
2.3 Assumptions of the Linear Regression Model 15
2.3.1 Linearity of the Regression Model 15 2.3.2 Full Rank 19
2.3.3 Regression 20 2.3.4 Spherical Disturbances 21 2.3.5 Data Generating Process for the Regressors 23 2.3.6 Normality 23
2.3.7 Independence 24
2.4 Summary and Conclusions 25
CHAPTER 3 Least Squares 26
3.2 Least Squares Regression 26
3.2.1 The Least Squares Coefficient Vector 27
vi
Trang 93.2.2 Application: An Investment Equation 28
3.2.3 Algebraic Aspects of the Least Squares Solution 30
3.2.4 Projection 31
3.3 Partitioned Regression and Partial Regression 32
3.4 Partial Regression and Partial Correlation Coefficients 36
3.5 Goodness of Fit and the Analysis of Variance 39
3.5.1 The Adjusted R-Squared and a Measure of Fit 42
3.5.2 R-Squared and the Constant Term in the Model 44
3.5.3 Comparing Models 45
3.6 Linearly Transformed Regression 46
3.7 Summary and Conclusions 47
CHAPTER 4 The Least Squares Estimator 51
4.2 Motivating Least Squares 52
4.2.1 The Population Orthogonality Conditions 52
4.2.2 Minimum Mean Squared Error Predictor 53
4.2.3 Minimum Variance Linear Unbiased Estimation 54
4.3 Finite Sample Properties of Least Squares 54
4.3.1 Unbiased Estimation 55
4.3.2 Bias Caused by Omission of Relevant Variables 56
4.3.3 Inclusion of Irrelevant Variables 58
4.3.4 The Variance of the Least Squares Estimator 58
4.3.5 The Gauss–Markov Theorem 60
4.3.6 The Implications of Stochastic Regressors 60
4.3.7 Estimating the Variance of the Least Squares Estimator 61 4.3.8 The Normality Assumption 63
4.4 Large Sample Properties of the Least Squares Estimator 63
4.4.1 Consistency of the Least Squares Estimator of β 63
4.4.2 Asymptotic Normality of the Least Squares Estimator 65 4.4.3 Consistency of s2and the Estimator of Asy Var[b] 67
4.4.4 Asymptotic Distribution of a Function of b: The Delta
Method 68 4.4.5 Asymptotic Efficiency 69
4.4.6 Maximum Likelihood Estimation 73
4.5 Interval Estimation 75
4.5.1 Forming a Confidence Interval for a Coefficient 76
4.5.2 Confidence Intervals Based on Large Samples 78
4.5.3 Confidence Interval for a Linear Combination of Coefficients:
The Oaxaca Decomposition 79
4.6 Prediction and Forecasting 80
4.6.1 Prediction Intervals 81
4.6.2 Predicting y When the Regression Model Describes Log y 81
Trang 104.6.3 Prediction Interval for y When the Regression Model Describes
Log y 83 4.6.4 Forecasting 87
4.7.1 Multicollinearity 89 4.7.2 Pretest Estimation 91 4.7.3 Principal Components 92 4.7.4 Missing Values and Data Imputation 94 4.7.5 Measurement Error 97
4.7.6 Outliers and Influential Observations 99
CHAPTER 5 Hypothesis Tests and Model Selection 108
5.2 Hypothesis Testing Methodology 108
5.2.1 Restrictions and Hypotheses 109 5.2.2 Nested Models 110
5.2.3 Testing Procedures—Neyman–Pearson Methodology 111 5.2.4 Size, Power, and Consistency of a Test 111
5.2.5 A Methodological Dilemma: Bayesian versus Classical Testing
112
5.3 Two Approaches to Testing Hypotheses 112
5.4 Wald Tests Based on the Distance Measure 115
5.4.1 Testing a Hypothesis about a Coefficient 115 5.4.2 The F Statistic and the Least Squares Discrepancy 117
5.5 Testing Restrictions Using the Fit of the Regression 121
5.5.1 The Restricted Least Squares Estimator 121 5.5.2 The Loss of Fit from Restricted Least Squares 122 5.5.3 Testing the Significance of the Regression 126 5.5.4 Solving Out the Restrictions and a Caution about
Using R2 126
5.6 Nonnormal Disturbances and Large-Sample Tests 127
5.7 Testing Nonlinear Restrictions 131
5.8 Choosing between Nonnested Models 134
5.8.1 Testing Nonnested Hypotheses 134 5.8.2 An Encompassing Model 135 5.8.3 Comprehensive Approach—The J Test 136
5.9 A Specification Test 137
5.10 Model Building—A General to Simple Strategy 138
5.10.1 Model Selection Criteria 139 5.10.2 Model Selection 140
5.10.3 Classical Model Selection 140 5.10.4 Bayesian Model Averaging 141
5.11 Summary and Conclusions 143
Trang 11CHAPTER 6 Functional Form and Structural Change 149
6.2 Using Binary Variables 149
6.2.1 Binary Variables in Regression 149
6.2.2 Several Categories 152
6.2.3 Several Groupings 152
6.2.4 Threshold Effects and Categorical Variables 154
6.2.5 Treatment Effects and Differences in Differences
Regression 155
6.3 Nonlinearity in the Variables 158
6.3.1 Piecewise Linear Regression 158
6.3.2 Functional Forms 160
6.3.3 Interaction Effects 161
6.3.4 Identifying Nonlinearity 162
6.3.5 Intrinsically Linear Models 165
6.4 Modeling and Testing for a Structural Break 168
6.4.1 Different Parameter Vectors 168
6.4.2 Insufficient Observations 169
6.4.3 Change in a Subset of Coefficients 170
6.4.4 Tests of Structural Break with Unequal Variances 171
6.4.5 Predictive Test of Model Stability 174
CHAPTER 7 Nonlinear, Semiparametric, and Nonparametric
Regression Models 181
7.2 Nonlinear Regression Models 182
7.2.1 Assumptions of the Nonlinear Regression Model 182
7.2.2 The Nonlinear Least Squares Estimator 184
7.2.3 Large Sample Properties of the Nonlinear Least Squares
Estimator 186 7.2.4 Hypothesis Testing and Parametric Restrictions 189
7.2.5 Applications 191
7.2.6 Computing the Nonlinear Least Squares Estimator 200
7.3 Median and Quantile Regression 202
7.3.1 Least Absolute Deviations Estimation 203
7.3.2 Quantile Regression Models 207
7.4 Partially Linear Regression 210
7.5 Nonparametric Regression 212
CHAPTER 8 Endogeneity and Instrumental Variable Estimation 219
8.2 Assumptions of the Extended Model 223
Trang 128.3 Estimation 224
8.3.1 Least Squares 225 8.3.2 The Instrumental Variables Estimator 225 8.3.3 Motivating the Instrumental Variables Estimator 227 8.3.4 Two-Stage Least Squares 230
8.4 Two Specification Tests 233
8.4.1 The Hausman and Wu Specification Tests 234 8.4.2 A Test for Overidentification 238
8.5.1 Least Squares Attenuation 240 8.5.2 Instrumental Variables Estimation 242 8.5.3 Proxy Variables 242
8.6 Nonlinear Instrumental Variables Estimation 246
8.8 Natural Experiments and the Search for Causal Effects 251
PART II Generalized Regression Model and Equation SystemsCHAPTER 9 The Generalized Regression Model and Heteroscedasticity 257
9.3 Efficient Estimation by Generalized Least Squares 264
9.3.1 Generalized Least Squares (GLS) 264 9.3.2 Feasible Generalized Least Squares (FGLS) 266
9.4 Heteroscedasticity and Weighted Least Squares 268
9.4.1 Ordinary Least Squares Estimation 269 9.4.2 Inefficiency of Ordinary Least Squares 270 9.4.3 The Estimated Covariance Matrix of b 270 9.4.4 Estimating the Appropriate Covariance Matrix for Ordinary
Least Squares 272
9.5 Testing for Heteroscedasticity 275
9.5.1 White’s General Test 275 9.5.2 The Breusch–Pagan/Godfrey LM Test 276
9.6 Weighted Least Squares 277
9.6.1 Weighted Least Squares with Known 278
9.6.2 Estimation When Contains Unknown Parameters 279
Trang 139.7 Applications 280
9.7.1 Multiplicative Heteroscedasticity 280
9.7.2 Groupwise Heteroscedasticity 282
CHAPTER 10 Systems of Equations 290
10.1 Introduction 290
10.2 The Seemingly Unrelated Regressions Model 292
10.2.1 Generalized Least Squares 293
10.2.2 Seemingly Unrelated Regressions with Identical Regressors 295 10.2.3 Feasible Generalized Least Squares 296
10.2.4 Testing Hypotheses 296
10.2.5 A Specification Test for the SUR Model 297
10.2.6 The Pooled Model 299
10.3 Seemingly Unrelated Generalized Regression Models 304
10.4 Nonlinear Systems of Equations 305
10.5 Systems of Demand Equations: Singular Systems 307
10.5.1 Cobb–Douglas Cost Function 307
10.5.2 Flexible Functional Forms: The Translog Cost Function 310
10.6 Simultaneous Equations Models 314
10.6.1 Systems of Equations 315
10.6.2 A General Notation for Linear Simultaneous Equations
Models 318 10.6.3 The Problem of Identification 321
10.6.4 Single Equation Estimation and Inference 326
10.6.5 System Methods of Estimation 329
10.6.6 Testing in the Presence of Weak Instruments 334
10.7 Summary and Conclusions 336
CHAPTER 11 Models for Panel Data 343
11.1 Introduction 343
11.2 Panel Data Models 344
11.2.1 General Modeling Framework for Analyzing Panel Data 345 11.2.2 Model Structures 346
11.2.3 Extensions 347
11.2.4 Balanced and Unbalanced Panels 348
11.2.5 Well-Behaved Panel Data 348
11.3 The Pooled Regression Model 349
11.3.1 Least Squares Estimation of the Pooled Model 349
11.3.2 Robust Covariance Matrix Estimation 350
11.3.3 Clustering and Stratification 352
11.3.4 Robust Estimation Using Group Means 354
Trang 1411.3.5 Estimation with First Differences 355 11.3.6 The Within- and Between-Groups Estimators 357
11.4 The Fixed Effects Model 359
11.4.1 Least Squares Estimation 360 11.4.2 Small T Asymptotics 362 11.4.3 Testing the Significance of the Group Effects 363 11.4.4 Fixed Time and Group Effects 363
11.4.5 Time-Invariant Variables and Fixed Effects Vector
Decomposition 364
11.5.1 Least Squares Estimation 372 11.5.2 Generalized Least Squares 373 11.5.3 Feasible Generalized Least Squares When Is Unknown 374
11.5.4 Testing for Random Effects 376 11.5.5 Hausman’s Specification Test for the Random Effects
Model 379 11.5.6 Extending the Unobserved Effects Model: Mundlak’s
Approach 380 11.5.7 Extending the Random and Fixed Effects Models:
Chamberlain’s Approach 381
11.6 Nonspherical Disturbances and Robust Covariance Estimation 385
11.6.1 Robust Estimation of the Fixed Effects Model 385 11.6.2 Heteroscedasticity in the Random Effects Model 387 11.6.3 Autocorrelation in Panel Data Models 388
11.6.4 Cluster (and Panel) Robust Covariance Matrices for Fixed and
Random Effects Estimators 388
11.9 Nonlinear Regression with Panel Data 411
11.9.1 A Robust Covariance Matrix for Nonlinear Least Squares 411 11.9.2 Fixed Effects 412
Models 421
11.12 Summary and Conclusions 426
Trang 15PART III Estimation Methodology
CHAPTER 12 Estimation Frameworks in Econometrics 432
12.1 Introduction 432
12.2 Parametric Estimation and Inference 434
12.2.1 Classical Likelihood-Based Estimation 434
12.2.2 Modeling Joint Distributions with Copula Functions 436
12.3 Semiparametric Estimation 439
12.3.1 GMM Estimation in Econometrics 439
12.3.2 Maximum Empirical Likelihood Estimation 440
12.3.3 Least Absolute Deviations Estimation and Quantile
Regression 441 12.3.4 Kernel Density Methods 442
12.3.5 Comparing Parametric and Semiparametric Analyses 443
12.5.5 Testing Hypotheses 453
12.6 Summary and Conclusions 454
CHAPTER 13 Minimum Distance Estimation and the Generalized
Method of Moments 455
13.1 Introduction 455
13.2 Consistent Estimation: The Method of Moments 456
13.2.1 Random Sampling and Estimating the Parameters of
Distributions 457 13.2.2 Asymptotic Properties of the Method of Moments
Estimator 461 13.2.3 Summary—The Method of Moments 463
13.3 Minimum Distance Estimation 463
13.4 The Generalized Method of Moments (GMM) Estimator 468
13.4.1 Estimation Based on Orthogonality Conditions 468
13.4.2 Generalizing the Method of Moments 470
13.4.3 Properties of the GMM Estimator 474
13.5 Testing Hypotheses in the GMM Framework 479
13.5.1 Testing the Validity of the Moment Restrictions 479
13.5.2 GMM Counterparts to the WALD, LM, and LR
Tests 480
Trang 1613.6 GMM Estimation of Econometric Models 482
13.6.1 Single-Equation Linear Models 482 13.6.2 Single-Equation Nonlinear Models 488 13.6.3 Seemingly Unrelated Regression Models 491 13.6.4 Simultaneous Equations Models with Heteroscedasticity 493 13.6.5 GMM Estimation of Dynamic Panel Data Models 496
13.7 Summary and Conclusions 507
CHAPTER 14 Maximum Likelihood Estimation 509
14.1 Introduction 509
14.2 The Likelihood Function and Identification of the Parameters 50914.3 Efficient Estimation: The Principle of Maximum Likelihood 51114.4 Properties of Maximum Likelihood Estimators 513
14.4.1 Regularity Conditions 514 14.4.2 Properties of Regular Densities 515 14.4.3 The Likelihood Equation 517 14.4.4 The Information Matrix Equality 517 14.4.5 Asymptotic Properties of the Maximum Likelihood
Estimator 517 14.4.5.a Consistency 518 14.4.5.b Asymptotic Normality 519 14.4.5.c Asymptotic Efficiency 520 14.4.5.d Invariance 521
14.4.5.e Conclusion 521 14.4.6 Estimating the Asymptotic Variance of the Maximum
Likelihood Estimator 521
14.5 Conditional Likelihoods, Econometric Models, and the GMM
Estimator 52314.6 Hypothesis and Specification Tests and Fit Measures 524
14.6.1 The Likelihood Ratio Test 526 14.6.2 The Wald Test 527
14.6.3 The Lagrange Multiplier Test 529 14.6.4 An Application of the Likelihood-Based Test Procedures 531 14.6.5 Comparing Models and Computing Model Fit 533
14.6.6 Vuong’s Test and the Kullback–Leibler Information
Criterion 534
14.7 Two-Step Maximum Likelihood Estimation 536
14.8 Pseudo-Maximum Likelihood Estimation and Robust Asymptotic
Covariance Matrices 542
14.8.1 Maximum Likelihood and GMM Estimation 543 14.8.2 Maximum Likelihood and M Estimation 543 14.8.3 Sandwich Estimators 545
14.8.4 Cluster Estimators 546
Trang 1714.9 Applications of Maximum Likelihood Estimation 548
14.9.1 The Normal Linear Regression Model 548
14.9.2 The Generalized Regression Model 552
14.9.2.a Multiplicative Heteroscedasticity 554 14.9.2.b Autocorrelation 557
14.9.3 Seemingly Unrelated Regression Models 560
14.9.3.a The Pooled Model 560 14.9.3.b The SUR Model 562 14.9.3.c Exclusion Restrictions 562 14.9.4 Simultaneous Equations Models 567
14.9.5 Maximum Likelihood Estimation of Nonlinear Regression
Models 568 14.9.6 Panel Data Applications 573
14.9.6.a ML Estimation of the Linear Random Effects
Model 574 14.9.6.b Nested Random Effects 576 14.9.6.c Random Effects in Nonlinear Models: MLE Using
Quadrature 580 14.9.6.d Fixed Effects in Nonlinear Models: Full MLE 584
14.10 Latent Class and Finite Mixture Models 588
14.10.1 A Finite Mixture Model 589
14.10.2 Measured and Unmeasured Heterogeneity 591
14.10.3 Predicting Class Membership 591
14.10.4 A Conditional Latent Class Model 592
14.10.5 Determining the Number of Classes 594
14.10.6 A Panel Data Application 595
14.11 Summary and Conclusions 598
CHAPTER 15 Simulation-Based Estimation and Inference and Random Parameter
15.1 Introduction 603
15.2.1 Generating Pseudo-Random Numbers 605
15.2.2 Sampling from a Standard Uniform Population 606
15.2.3 Sampling from Continuous Distributions 607
15.2.4 Sampling from a Multivariate Normal Population 608
15.2.5 Sampling from Discrete Populations 608
15.3 Simulation-Based Statistical Inference: The Method of Krinsky and
15.4 Bootstrapping Standard Errors and Confidence Intervals 611
15.5 Monte Carlo Studies 615
15.5.1 A Monte Carlo Study: Behavior of a Test Statistic 617
15.5.2 A Monte Carlo Study: The Incidental Parameters Problem 619
15.6 Simulation-Based Estimation 621
15.6.1 Random Effects in a Nonlinear Model 621
Trang 1815.6.2 Monte Carlo Integration 623
15.6.2.a Halton Sequences and Random Draws for
Simulation-Based Integration 625 15.6.2.b Computing Multivariate Normal Probabilities Using
the GHK Simulator 627 15.6.3 Simulation-Based Estimation of Random Effects Models 629
15.7 A Random Parameters Linear Regression Model 634
15.8 Hierarchical Linear Models 639
15.9 Nonlinear Random Parameter Models 641
15.10 Individual Parameter Estimates 642
15.11 Mixed Models and Latent Class Models 650
15.12 Summary and Conclusions 653
CHAPTER 16 Bayesian Estimation and Inference 655
16.1 Introduction 655
16.2 Bayes Theorem and the Posterior Density 656
16.3 Bayesian Analysis of the Classical Regression Model 658
16.3.1 Analysis with a Noninformative Prior 659 16.3.2 Estimation with an Informative Prior Density 661
16.4 Bayesian Inference 664
16.4.1 Point Estimation 664 16.4.2 Interval Estimation 665 16.4.3 Hypothesis Testing 666 16.4.4 Large-Sample Results 668
16.5 Posterior Distributions and the Gibbs Sampler 668
16.6 Application: Binomial Probit Model 671
16.7 Panel Data Application: Individual Effects Models 674
16.8 Hierarchical Bayes Estimation of a Random Parameters Model 67616.9 Summary and Conclusions 678
PART IV Cross Sections, Panel Data, and MicroeconometricsCHAPTER 17 Discrete Choice 681
17.1 Introduction 681
17.2 Models for Binary Outcomes 683
17.2.1 Random Utility Models for Individual Choice 684 17.2.2 A Latent Regression Model 686
17.2.3 Functional Form and Regression 687
17.3 Estimation and Inference in Binary Choice Models 690
17.3.1 Robust Covariance Matrix Estimation 692 17.3.2 Marginal Effects and Average Partial Effects 693
Trang 1917.3.2.a Average Partial Effects 696 17.3.2.b Interaction Effects 699 17.3.3 Measuring Goodness of Fit 701
17.3.4 Hypothesis Tests 703
17.3.5 Endogenous Right-Hand-Side Variables in Binary Choice
Models 706 17.3.6 Endogenous Choice-Based Sampling 710
17.3.7 Specification Analysis 711
17.3.7.a Omitted Variables 713 17.3.7.b Heteroscedasticity 714
17.4 Binary Choice Models for Panel Data 716
17.4.1 The Pooled Estimator 717
17.4.2 Random Effects Models 718
17.4.3 Fixed Effects Models 721
17.4.4 A Conditional Fixed Effects Estimator 722
17.4.5 Mundlak’s Approach, Variable Addition, and Bias
Reduction 727 17.4.6 Dynamic Binary Choice Models 729
17.4.7 A Semiparametric Model for Individual Heterogeneity 731 17.4.8 Modeling Parameter Heterogeneity 733
17.4.9 Nonresponse, Attrition, and Inverse Probability Weighting 734
17.5 Bivariate and Multivariate Probit Models 738
17.5.1 Maximum Likelihood Estimation 739
17.5.2 Testing for Zero Correlation 742
17.5.3 Partial Effects 742
17.5.4 A Panel Data Model for Bivariate Binary Response 744 17.5.5 Endogenous Binary Variable in a Recursive Bivariate Probit
Model 745 17.5.6 Endogenous Sampling in a Binary Choice Model 749
17.5.7 A Multivariate Probit Model 752
17.6 Summary and Conclusions 755
CHAPTER 18 Discrete Choices and Event Counts 760
18.1 Introduction 760
18.2 Models for Unordered Multiple Choices 761
18.2.1 Random Utility Basis of the Multinomial Logit Model 761 18.2.2 The Multinomial Logit Model 763
18.2.3 The Conditional Logit Model 766
18.2.4 The Independence from Irrelevant Alternatives
Assumption 767 18.2.5 Nested Logit Models 768
18.2.6 The Multinomial Probit Model 770
18.2.7 The Mixed Logit Model 771
18.2.8 A Generalized Mixed Logit Model 772
Trang 2018.2.9 Application: Conditional Logit Model for Travel Mode
Choice 773 18.2.10 Estimating Willingness to Pay 779 18.2.11 Panel Data and Stated Choice Experiments 781 18.2.12 Aggregate Market Share Data—The BLP Random Parameters
Model 782
18.3 Random Utility Models for Ordered Choices 784
18.3.1 The Ordered Probit Model 787 18.3.2 A Specification Test for the Ordered Choice Model 791 18.3.3 Bivariate Ordered Probit Models 792
18.3.4 Panel Data Applications 794
18.3.4.a Ordered Probit Models with Fixed Effects 794 18.3.4.b Ordered Probit Models with Random Effects 795 18.3.5 Extensions of the Ordered Probit Model 798
18.3.5.a Threshold Models—Generalized Ordered Choice
Models 799 18.3.5.b Thresholds and Heterogeneity—Anchoring
Vignettes 800
18.4 Models for Counts of Events 802
18.4.1 The Poisson Regression Model 803 18.4.2 Measuring Goodness of Fit 804 18.4.3 Testing for Overdispersion 805 18.4.4 Heterogeneity and the Negative Binomial Regression
Model 806 18.4.5 Functional Forms for Count Data Models 807 18.4.6 Truncation and Censoring in Models for Counts 810 18.4.7 Panel Data Models 815
18.4.7.a Robust Covariance Matrices for Pooled
Estimators 816 18.4.7.b Fixed Effects 817 18.4.7.c Random Effects 818 18.4.8 Two-Part Models: Zero Inflation and Hurdle Models 821 18.4.9 Endogenous Variables and Endogenous Participation 826
18.5 Summary and Conclusions 829
CHAPTER 19 Limited Dependent Variables—Truncation, Censoring, and Sample
Selection 833
19.1 Introduction 833
19.2.1 Truncated Distributions 834 19.2.2 Moments of Truncated Distributions 835 19.2.3 The Truncated Regression Model 837 19.2.4 The Stochastic Frontier Model 839
19.3.1 The Censored Normal Distribution 846
Trang 2119.3.2 The Censored Regression (Tobit) Model 848
19.3.3 Estimation 850
19.3.4 Two-Part Models and Corner Solutions 852
19.3.5 Some Issues in Specification 858
19.3.5.a Heteroscedasticity 858 19.3.5.b Nonnormality 859 19.3.6 Panel Data Applications 860
19.4 Models for Duration 861
19.4.1 Models for Duration Data 862
19.4.2 Duration Data 862
19.4.3 A Regression-Like Approach: Parametric Models of
Duration 863 19.4.3.a Theoretical Background 863 19.4.3.b Models of the Hazard Function 864 19.4.3.c Maximum Likelihood Estimation 866 19.4.3.d Exogenous Variables 867
19.4.3.e Heterogeneity 868 19.4.4 Nonparametric and Semiparametric Approaches 869
19.5 Incidental Truncation and Sample Selection 872
19.5.1 Incidental Truncation in a Bivariate Distribution 873
19.5.2 Regression in a Model of Selection 873
19.5.3 Two-Step and Maximum Likelihood Estimation 876
19.5.4 Sample Selection in Nonlinear Models 880
19.5.5 Panel Data Applications of Sample Selection Models 883
19.5.5.a Common Effects in Sample Selection Models 884 19.5.5.b Attrition 886
19.6 Evaluating Treatment Effects 888
19.6.1 Regression Analysis of Treatment Effects 890
19.6.1.a The Normality Assumption 892 19.6.1.b Estimating the Effect of Treatment on
the Treated 893 19.6.2 Propensity Score Matching 894
19.6.3 Regression Discontinuity 897
19.7 Summary and Conclusions 898
PART V Time Series and Macroeconometrics
CHAPTER 20 Serial Correlation 903
Trang 2220.4 Some Asymptotic Results for Analyzing Time-Series Data 912
20.4.1 Convergence of Moments—The Ergodic Theorem 913 20.4.2 Convergence to Normality—A Central Limit Theorem 915
20.5 Least Squares Estimation 918
20.5.1 Asymptotic Properties of Least Squares 918 20.5.2 Estimating the Variance of the Least Squares Estimator 919
20.7 Testing for Autocorrelation 922
20.7.1 Lagrange Multiplier Test 922 20.7.2 Box and Pierce’s Test and Ljung’s Refinement 922 20.7.3 The Durbin–Watson Test 923
20.7.4 Testing in the Presence of a Lagged Dependent
Variable 923 20.7.5 Summary of Testing Procedures 924
20.8 Efficient Estimation When Is Known 924
20.9 Estimation When Is Unknown 926
20.9.1 AR(1) Disturbances 926 20.9.2 Application: Estimation of a Model with Autocorrelation 927 20.9.3 Estimation with a Lagged Dependent Variable 929
20.10 Autoregressive Conditional Heteroscedasticity 930
20.10.1 The ARCH(1) Model 931 20.10.2 ARCH(q), ARCH-in-Mean, and Generalized ARCH
Models 932 20.10.3 Maximum Likelihood Estimation of the Garch Model 934 20.10.4 Testing for Garch Effects 936
20.10.5 Pseudo–Maximum Likelihood Estimation 937
20.11 Summary and Conclusions 939
CHAPTER 21 Nonstationary Data 942
21.1 Introduction 942
21.2 Nonstationary Processes and Unit Roots 942
21.2.1 Integrated Processes and Differencing 942 21.2.2 Random Walks, Trends, and Spurious Regressions 944 21.2.3 Tests for Unit Roots in Economic Data 947
21.2.4 The Dickey–Fuller Tests 948 21.2.5 The KPSS Test of Stationarity 958
21.3 Cointegration 959
21.3.1 Common Trends 962 21.3.2 Error Correction and VAR Representations 963 21.3.3 Testing for Cointegration 965
21.3.4 Estimating Cointegration Relationships 967 21.3.5 Application: German Money Demand 967
21.3.5.a Cointegration Analysis and a Long-Run Theoretical
Model 968 21.3.5.b Testing for Model Instability 969
Trang 2321.4 Nonstationary Panel Data 970
21.5 Summary and Conclusions 971
PART VI Appendices
Appendix A Matrix Algebra 973
A.2 Algebraic Manipulation of Matrices 973
A.2.1 Equality of Matrices 973
A.2.2 Transposition 974
A.2.3 Matrix Addition 974
A.2.4 Vector Multiplication 975
A.2.5 A Notation for Rows and Columns of a Matrix 975
A.2.6 Matrix Multiplication and Scalar Multiplication 975
A.2.7 Sums of Values 977
A.2.8 A Useful Idempotent Matrix 978
A.3 Geometry of Matrices 979
A.3.1 Vector Spaces 979
A.3.2 Linear Combinations of Vectors and Basis Vectors 981 A.3.3 Linear Dependence 982
A.3.4 Subspaces 983
A.3.5 Rank of a Matrix 984
A.3.6 Determinant of a Matrix 986
A.3.7 A Least Squares Problem 987
A.4 Solution of a System of Linear Equations 989
A.4.1 Systems of Linear Equations 989
A.4.2 Inverse Matrices 990
A.4.3 Nonhomogeneous Systems of Equations 992
A.4.4 Solving the Least Squares Problem 992
A.5 Partitioned Matrices 992
A.5.1 Addition and Multiplication of Partitioned Matrices 993 A.5.2 Determinants of Partitioned Matrices 993
A.5.3 Inverses of Partitioned Matrices 993
A.5.4 Deviations from Means 994
A.5.5 Kronecker Products 994
A.6 Characteristic Roots and Vectors 995
A.6.1 The Characteristic Equation 995
A.6.2 Characteristic Vectors 996
A.6.3 General Results for Characteristic Roots and Vectors 996 A.6.4 Diagonalization and Spectral Decomposition of a Matrix 997 A.6.5 Rank of a Matrix 997
A.6.6 Condition Number of a Matrix 999
A.6.7 Trace of a Matrix 999
A.6.8 Determinant of a Matrix 1000
A.6.9 Powers of a Matrix 1000
A.6.10 Idempotent Matrices 1002
Trang 24A.6.11 Factoring a Matrix 1002 A.6.12 The Generalized Inverse of a Matrix 1003
A.7 Quadratic Forms and Definite Matrices 1004
A.7.1 Nonnegative Definite Matrices 1005 A.7.2 Idempotent Quadratic Forms 1006 A.7.3 Comparing Matrices 1006
A.8 Calculus and Matrix Algebra 1007
A.8.1 Differentiation and the Taylor Series 1007 A.8.2 Optimization 1010
A.8.3 Constrained Optimization 1012 A.8.4 Transformations 1014
Appendix B Probability and Distribution Theory 1015
B.2.1 Probability Distributions 1015 B.2.2 Cumulative Distribution Function 1016
B.3 Expectations of a Random Variable 1017
B.4 Some Specific Probability Distributions 1019
B.4.1 The Normal Distribution 1019 B.4.2 The Chi-Squared, t, and F Distributions 1021 B.4.3 Distributions with Large Degrees of Freedom 1023 B.4.4 Size Distributions: The Lognormal Distribution 1024 B.4.5 The Gamma and Exponential Distributions 1024 B.4.6 The Beta Distribution 1025
B.4.7 The Logistic Distribution 1025 B.4.8 The Wishart Distribution 1025 B.4.9 Discrete Random Variables 1026
B.5 The Distribution of a Function of a Random Variable 1026B.6 Representations of a Probability Distribution 1028
B.7 Joint Distributions 1030
B.7.1 Marginal Distributions 1030 B.7.2 Expectations in a Joint Distribution 1031 B.7.3 Covariance and Correlation 1031 B.7.4 Distribution of a Function of Bivariate Random
Variables 1032
B.8 Conditioning in a Bivariate Distribution 1034
B.8.1 Regression: The Conditional Mean 1034 B.8.2 Conditional Variance 1035
B.8.3 Relationships Among Marginal and Conditional
Moments 1035 B.8.4 The Analysis of Variance 1037
B.9 The Bivariate Normal Distribution 1037
B.10 Multivariate Distributions 1038
B.10.1 Moments 1038
Trang 25B.10.2 Sets of Linear Functions 1039
B.10.3 Nonlinear Functions 1040
B.11 The Multivariate Normal Distribution 1041
B.11.1 Marginal and Conditional Normal Distributions 1041
B.11.2 The Classical Normal Linear Regression Model 1042
B.11.3 Linear Functions of a Normal Vector 1043
B.11.4 Quadratic forms in a Standard Normal Vector 1043
B.11.5 The F Distribution 1045
B.11.6 A Full Rank Quadratic Form 1045
B.11.7 Independence of a Linear and a Quadratic Form 1046
Appendix C Estimation and Inference 1047
C.2 Samples and Random Sampling 1048
C.3 Descriptive Statistics 1048
C.4 Statistics as Estimators—Sampling Distributions 1051
C.5 Point Estimation of Parameters 1055
C.5.1 Estimation in a Finite Sample 1055
C.5.2 Efficient Unbiased Estimation 1058
C.6 Interval Estimation 1060
C.7 Hypothesis Testing 1062
C.7.1 Classical Testing Procedures 1062
C.7.2 Tests Based on Confidence Intervals 1065
D.2.4 Convergence to a Random Variable 1074
D.2.5 Convergence in Distribution: Limiting Distributions 1076 D.2.6 Central Limit Theorems 1078
D.2.7 The Delta Method 1083
D.3 Asymptotic Distributions 1084
D.3.1 Asymptotic Distribution of a Nonlinear Function 1086
D.3.2 Asymptotic Expectations 1087
D.4 Sequences and the Order of a Sequence 1088
Appendix E Computation and Optimization 1089
E.2 Computation in Econometrics 1090
E.2.1 Computing Integrals 1090
Trang 26E.2.2 The Standard Normal Cumulative Distribution Function 1090 E.2.3 The Gamma and Related Functions 1091
E.2.4 Approximating Integrals by Quadrature 1092
E.3.1 Algorithms 1095 E.3.2 Computing Derivatives 1096 E.3.3 Gradient Methods 1097 E.3.4 Aspects of Maximum Likelihood Estimation 1100 E.3.5 Optimization with Constraints 1101
E.3.6 Some Practical Considerations 1102 E.3.7 The EM Algorithm 1104
E.4.1 Function of One Parameter 1106 E.4.2 Function of Two Parameters: The Gamma Distribution 1107 E.4.3 A Concentrated Log-Likelihood Function 1108
Appendix F Data Sets Used in Applications 1109
References 1115
Combined Author and Subject Index 1161
Trang 27E X A M P L E S A N D A P P L I C AT I O N S
Q
Example 1.1 Behavioral Models and the Nobel Laureates 2
Example 1.2 Keynes’s Consumption Function 4
CHAPTER 2 The Linear Regression Model 11
Example 2.1 Keynes’s Consumption Function 13
Example 2.2 Earnings and Education 14
Example 2.3 The U.S Gasoline Market 17
Example 2.4 The Translog Model 18
Example 2.6 An Inestimable Model 19
Example 2.7 Nonzero Conditional Mean of the Disturbances 20
CHAPTER 3 Least Squares 26
Section 3.2.2 Application: An Investment Equation 28
Example 3.1 Partial Correlations 38
Example 3.2 Fit of a Consumption Function 41
Example 3.3 Analysis of Variance for an Investment Equation 42
Example 3.4 Art Appreciation 46
CHAPTER 4 The Least Squares Estimator 51
Example 4.1 The Sampling Distribution of a Least Squares
Estimator 54Example 4.2 Omitted Variable 57
Example 4.3 Sampling Variance in the Two-Variable Regression
Model 59Example 4.4 Nonlinear Functions of Parameters: The Delta Method 69Example 4.5 Least Squares vs Least Absolute Deviations—A Monte
Carlo Study 71Example 4.6 MLE with Normally Distributed Disturbances 74
Example 4.7 The Gamma Regression Model 74
Example 4.8 Confidence Interval for the Income Elasticity of Demand for
Gasoline 77Example 4.9 Confidence Interval Based on the Asymptotic
Distribution 78Example 4.10 Pricing Art 85
Example 4.11 Multicollinearity in the Longley Data 90
Example 4.12 Predicting Movie Success 93
xxv
Trang 28CHAPTER 5 Hypothesis Tests and Model Selection 108
Example 5.1 Art Appreciation 116
Example 5.2 Earnings Equation 116
Example 5.3 Restricted Investment Equation 120
Example 5.4 Production Function 124
Example 5.5 F Test for the Earnings Equation 126
Example 5.6 A Long-Run Marginal Propensity to Consume 132Example 5.7 J Test for a Consumption Function 136
Example 5.8 Size of a RESET Test 138
Example 5.9 Bayesian Averaging of Classical Estimates 142
CHAPTER 6 Functional Form and Structural Change 149
Example 6.1 Dummy Variable in an Earnings Equation 150
Example 6.2 Value of a Signature 150
Example 6.3 Genre Effects on Movie Box Office Receipts 152
Example 6.4 Analysis of Covariance 153
Example 6.5 A Natural Experiment: The Mariel Boatlift 157
Example 6.6 Functional Form for a Nonlinear Cost Function 162Example 6.7 Intrinsically Linear Regression 166
Example 6.8 CES Production Function 167
Example 6.9 Structural Break in the Gasoline Market 172
Example 6.10 The World Health Report 173
CHAPTER 7 Nonlinear, Semiparametric, and Nonparametric Regression
Example 7.1 CES Production Function 182
Example 7.2 Identification in a Translog Demand System 183
Example 7.3 First-Order Conditions for a Nonlinear Model 185Example 7.4 Analysis of a Nonlinear Consumption Function 191Example 7.5 The Box–Cox Transformation 193
Example 7.6 Interaction Effects in a Loglinear Model for Income 195Example 7.7 Linearized Regression 201
Example 7.8 Nonlinear Least Squares 202
Example 7.9 LAD Estimation of a Cobb–Douglas Production
Function 205Example 7.10 Income Elasticity of Credit Card Expenditure 208Example 7.11 Partially Linear Translog Cost Function 211
Example 7.12 A Nonparametric Average Cost Function 214
CHAPTER 8 Endogeneity and Instrumental Variable Estimation 219
Example 8.1 Models with Endogenous Right-Hand-Side Variables 219Example 8.2 Instrumental Variable Analysis 228
Example 8.3 Streams as Instruments 228
Example 8.4 Instrumental Variable in Regression 229
Example 8.5 Instrumental Variable Estimation of a Labor Supply
Equation 232Example 8.6 Labor Supply Model (Continued) 236
Trang 29Example 8.7 Hausman Test for a Consumption Function 237
Example 8.8 Overidentification of the Labor Supply Equation 239Example 8.9 Income and Education in a Study of Twins 244
Example 8.10 Instrumental Variables Estimates of the Consumption
Function 248Example 8.11 Does Television Cause Autism? 252
Example 8.12 Is Season of Birth a Valid Instrument? 254
CHAPTER 9 The Generalized Regression Model and Heteroscedasticity 257
Example 9.1 Heteroscedastic Regression 269
Example 9.2 The White Estimator 274
Example 9.3 Testing for Heteroscedasticity 277
Section 9.7.1 Multiplicative Heteroscedasticity 280
Example 9.4 Multiplicative Heteroscedasticity 281
Section 9.7.2 Groupwise Heteroscedasticity 282
Example 9.5 Groupwise Heteroscedasticity 284
CHAPTER 10 Systems of Equations 290
Example 10.1 A Regional Production Model for Public Capital 300Example 10.2 Stone’s Expenditure System 307
Example 10.3 A Cost Function for U.S Manufacturing 313
Example 10.4 Structure and Reduced Form in a Small Macroeconomic
Example 10.5 Identification 324
Example 10.6 Klein’s Model I 332
CHAPTER 11 Models for Panel Data 343
Example 11.1 Wage Equation 351
Example 11.2 Repeat Sales of Monet Paintings 354
Example 11.3 Robust Estimators of the Wage Equation 355
Example 11.4 Analysis of Covariance and the World Health Organization
Data 358Example 11.5 Fixed Effects Wage Equation 368
Example 11.6 Testing for Random Effects 377
Example 11.7 Estimates of the Random Effects Model 378
Example 11.8 Hausman Test for Fixed versus Random Effects 380
Example 11.9 Variable Addition Test for Fixed versus Random Effects 381Example 11.10 Hospital Costs 384
Example 11.11 Robust Standard Errors for Fixed and Random Effects
Estimators 389Example 11.12 Spatial Autocorrelation in Real Estate Sales 392
Example 11.13 Spatial Lags in Health Expenditures 393
Example 11.14 The Returns to Schooling 397
Example 11.15 Dynamic Labor Supply Equation 408
Example 11.16 Health Care Utilization 411
Example 11.17 Exponential Model with Fixed Effects 413
Example 11.18 Demand for Electricity and Gas 416
Example 11.19 Random Coefficients Model 418
Trang 30Example 11.20 Fannie Mae’s Pass Through 420
Example 11.21 Dynamic Panel Data Models 421
Example 11.22 A Mixed Fixed Growth Model for Developing
Countries 426
CHAPTER 12 Estimation Frameworks in Econometrics 432
Example 12.1 The Linear Regression Model 435
Example 12.2 The Stochastic Frontier Model 435
Example 12.3 Joint Modeling of a Pair of Event Counts 438
Example 12.4 Semiparametric Estimator for Binary Choice Models 442Example 12.5 A Model of Vacation Expenditures 443
CHAPTER 13 Minimum Distance Estimation and the Generalized Method
of Moments 455
Example 13.1 Euler Equations and Life Cycle Consumption 455
Example 13.2 Method of Moments Estimator for N[ μ, σ2] 457
Example 13.3 Inverse Gaussian (Wald) Distribution 458
Example 13.4 Mixtures of Normal Distributions 459
Example 13.5 Gamma Distribution 460
Example 13.5 (Continued) 462
Example 13.6 Minimum Distance Estimation of a Hospital Cost
Function 466Example 13.7 GMM Estimation of a Nonlinear Regression Model 472Example 13.8 Empirical Moment Equation for Instrumental
Variables 475Example 13.9 Overidentifying Restrictions 479
Example 13.10 GMM Estimation of a Dynamic Panel Data Model of Local
Government Expenditures 503
CHAPTER 14 Maximum Likelihood Estimation 509
Example 14.1 Identification of Parameters 510
Example 14.2 Log-Likelihood Function and Likelihood Equations for the
Normal Distribution 513Example 14.3 Information Matrix for the Normal Distribution 520Example 14.4 Variance Estimators for an MLE 522
Example 14.5 Two-Step ML Estimation 540
Example 14.6 Multiplicative Heteroscedasticity 557
Example 14.7 Autocorrelation in a Money Demand Equation 559Example 14.8 ML Estimates of a Seemingly Unrelated Regressions
Example 14.9 Identification in a Loglinear Regression Model 568Example 14.10 Geometric Regression Model for Doctor Visits 571Example 14.11 Maximum Likelihood and FGLS Estimates of a Wage
Equation 576Example 14.12 Statewide Productivity 579
Example 14.13 Random Effects Geometric Regression Model 584Example 14.14 Fixed and Random Effects Geometric Regression 588Example 14.15 Latent Class Model for Grade Point Averages 590
Trang 31Example 14.16 Latent Class Regression Model for Grade Point
Averages 593Section 14.10.6 A Panel Data Application 595
Example 14.17 Latent Class Model for Health Care Utilization 596
CHAPTER 15 Simulation-Based Estimation and Inference and Random Parameter
Example 15.1 Inferring the Sampling Distribution of the Least Squares
Estimator 603Example 15.2 Bootstrapping the Variance of the LAD Estimator 603Example 15.3 Least Simulated Sum of Squares 604
Example 15.4 Long Run Elasticities 610
Example 15.5 Bootstrapping the Variance of the Median 612
Example 15.6 Bootstrapping Standard Errors and Confidence Intervals in a
Panel 614Example 15.7 Monte Carlo Study of the Mean versus the Median 616Section 15.5.1 A Monte Carlo Study: Behavior of a Test Statistic 617Section 15.5.2 A Monte Carlo Study: The Incidental Parameters
Example 15.8 Fractional Moments of the Truncated Normal
Distribution 624Example 15.9 Estimating the Lognormal Mean 627
Example 15.10 Poisson Regression Model with Random Effects 633
Example 15.11 Maximum Simulated Likelhood Estimation of the Random
Effects Linear Regression Model 633Example 15.12 Random Parameters Wage Equation 636
Example 15.13 Least Simulated Sum of Squares Estimates of a Production
Function Model 638Example 15.14 Hierarchical Linear Model of Home Prices 640
Example 15.15 Individual State Estimates of Private Capital Coefficient 645Example 15.16 Mixed Linear Model for Wages 646
Example 15.17 Maximum Simulated Likelihood Estimation of a Binary
Choice Model 651
CHAPTER 16 Bayesian Estimation and Inference 655
Example 16.1 Bayesian Estimation of a Probability 657
Example 16.2 Estimation with a Conjugate Prior 662
Example 16.3 Bayesian Estimate of the Marginal Propensity
to Consume 664Example 16.4 Posterior Odds for the Classical Regression Model 667Example 16.5 Gibbs Sampling from the Normal Distribution 669
Section 16.6 Application: Binomial Probit Model 671
Example 16.6 Gibbs Sampler for a Probit Model 673
Section 16.7 Panel Data Application: Individual Effects Models 674
CHAPTER 17 Discrete Choice 681
Example 17.1 Labor Force Participation Model 683
Example 17.2 Structural Equations for a Binary Choice Model 685
Trang 32Example 17.3 Probability Models 694
Example 17.4 Average Partial Effects 699
Example 17.5 Interaction Effect 700
Example 17.6 Prediction with a Probit Model 703
Example 17.7 Testing for Structural Break in a Logit Model 705
Example 17.8 Labor Supply Model 708
Example 17.9 Credit Scoring 711
Example 17.10 Specification Tests in a Labor Force Participation Model 715Example 17.11 Binary Choice Models for Panel Data 724
Example 17.12 Fixed Effects Logit Models: Magazine Prices Revisited 726Example 17.13 Panel Data Random Effects Estimators 728
Example 17.14 An Intertemporal Labor Force Participation Equation 731Example 17.15 Semiparametric Models of Heterogeneity 732
Example 17.16 Parameter Heterogeneity in a Binary Choice Model 733Example 17.17 Nonresponse in the GSOEP Sample 737
Example 17.18 Tetrachoric Correlation 741
Example 17.19 Bivariate Probit Model for Health Care Utilization 743Example 17.20 Bivariate Random Effects Model for Doctor and Hospital
Visits 745Example 17.21 Gender Economics Courses at Liberal Arts Colleges 747Example 17.22 Cardholder Status and Default Behavior 751
Example 17.23 A Multivariate Probit Model for Product Innovations 753
CHAPTER 18 Discrete Choices and Event Counts 760
Example 18.1 Hollingshead Scale of Occupations 765
Example 18.2 Movie Ratings 786
Example 18.3 Rating Assignments 790
Example 18.4 Brant Test for an Ordered Probit Model of Health
Satisfaction 792Example 18.5 Calculus and Intermediate Economics Courses 792
Example 18.6 Health Satisfaction 796
Example 18.7 Count Data Models for Doctor Visits 809
Example 18.8 Major Derogatory Reports 812
Example 18.9 Extramarital Affairs 814
Example 18.10 Panel Data Models for Doctor Visits 821
Example 18.11 Zero Inflation Models for Major Derogatory Reports 824Example 18.12 Hurdle Model for Doctor Visits 826
CHAPTER 19 Limited Dependent Variables—Truncation, Censoring, and Sample
Selection 833
Example 19.1 Truncated Uniform Distribution 835
Example 19.2 A Truncated Lognormal Income Distribution 836
Example 19.3 Stochastic Cost Frontier for Swiss Railroads 843
Example 19.4 Censored Random Variable 847
Example 19.5 Estimated Tobit Equations for Hours Worked 851
Example 19.6 Two-Part Model for Extramarital Affairs 856
Example 19.7 Multiplicative Heteroscedasticity in the Tobit Model 858Example 19.8 Survival Models for Strike Duration 871
Trang 33Example 19.9 Incidental Truncation 872
Example 19.10 A Model of Labor Supply 874
Example 19.11 Female Labor Supply 878
Example 19.12 A Mover-Stayer Model for Migration 879
Example 19.13 Doctor Visits and Insurance 881
Example 19.14 German Labor Market Interventions 888
Example 19.15 Treatment Effects on Earnings 895
CHAPTER 20 Serial Correlation 903
Example 20.1 Money Demand Equation 903
Example 20.2 Autocorrelation Induced by Misspecification of the
Example 20.3 Negative Autocorrelation in the Phillips Curve 904
Example 20.4 Autocorrelation Consistent Covariance Estimation 921Section 20.9.2 Application: Estimation of a Model with
Autocorrelation 927Example 20.5 Stochastic Volatility 930
Example 20.6 GARCH Model for Exchange Rate Volatility 937
CHAPTER 21 Nonstationary Data 942
Example 21.1 A Nonstationary Series 943
Example 21.2 Tests for Unit Roots 951
Example 21.3 Augmented Dickey–Fuller Test for a Unit Root in
Example 21.4 Is There a Unit Root in GDP? 958
Example 21.5 Cointegration in Consumption and Output 960
Example 21.6 Several Cointegrated Series 960
Example 21.7 Multiple Cointegrating Vectors 962
Example 21.8 Cointegration in Consumption and Output
(Continued) 966
Appendix C Estimation and Inference 1047
Example C.1 Descriptive Statistics for a Random Sample 1050
Example C.2 Kernel Density Estimator for the Income Data 1051
Example C.3 Sampling Distribution of a Sample Mean 1053
Example C.4 Sampling Distribution of the Sample Minimum 1053
Example C.5 Mean Squared Error of the Sample Variance 1057
Example C.6 Likelihood Functions for Exponential and Normal
Distributions 1058Example C.7 Variance Bound for the Poisson Distribution 1059
Example C.8 Confidence Intervals for the Normal Mean 1061
Example C.9 Estimated Confidence Intervals for a Normal Mean and
Variance 1062Example C.10 Testing a Hypothesis about a Mean 1063
Example C.11 Consistent Test about a Mean 1065
Example C.12 Testing a Hypothesis about a Mean with a Confidence
Interval 1065Example C.13 One-Sided Test about a Mean 1066
Trang 34Appendix D Large-Sample Distribution Theory 1066
Example D.1 Mean Square Convergence of the Sample Minimum in
Exponential Sampling 1068Example D.2 Estimating a Function of the Mean 1070
Example D.3 Probability Limit of a Function of x and s2 1074Example D.4 Limiting Distribution of t n−1 1076
Example D.5 The F Distribution 1078
Example D.6 The Lindeberg–Levy Central Limit Theorem 1080Example D.7 Asymptotic Distribution of the Mean of an Exponential
Sample 1085Example D.8 Asymptotic Inefficiency of the Median in Normal
Sampling 1086Example D.9 Asymptotic Distribution of a Function of Two
Estimators 1086Example D.10 Asymptotic Moments of the Sample Variance 1088
Appendix E Computation and Optimization 1089
Section E.4.1 Function of One Parameter 1106
Section E.4.2 Function of Two Parameters: The Gamma
Distribution 1107Section E.4.3 A Concentrated Log-Likelihood Function 1108
Trang 35P R E F A C E
Q
ECONOMETRIC ANALYSIS
Econometric Analysis provides a broad introduction to the field of econometrics This
field grows continually—a list of journals devoted at least in part, if not completely,
to econometrics now includes The Journal of Applied Econometrics, The Journal of
Econometrics, The Econometrics Journal, Econometric Theory, Econometric Reviews, Journal of Business and Economic Statistics, Empirical Economics, Foundations and Trends in Econometrics, The Review of Economics and Statistics, and Econometrica.
Constructing a textbook-style survey to introduce the topic at a graduate level has
become increasingly ambitious Nonetheless, I believe that one can successfully seek
that objective in a single textbook This text attempts to present, at an entry level, enough
of the topics in econometrics that a student can comfortably move from here to practice
or more advanced study in one or more specialized areas The book is also intended as
a bridge for students and analysts in the social sciences between an introduction to thefield and the professional literature
NEW TO THIS EDITION
This seventh edition is a major revision of Econometric Analysis Among the most
obvious changes are
• Reorganization of the early material that is taught in the first-semester course,including
— All material on hypothesis testing and specification presented in a singlechapter
— New results on prediction
— Greater and earlier emphasis on instrumental variables and endogeneity
— Additional results on basic panel data models
• New applications and examples, with greater detail
• Greater emphasis on specific areas of application in the advanced material
• New material on simulation-based methods, especially bootstrapping and MonteCarlo studies
• Several examples that explain interaction effects
• Specific recent applications including quantile regression
• New applications in discrete choice modeling
• New material on endogeneity and its implications for model structure
xxxiii
Trang 36THE SEVENTH EDITION OF ECONOMETRIC ANALYSIS
The book has two objectives The first is to introduce students to applied econometrics,
including basic techniques in linear regression analysis and some of the rich variety
of models that are used when the linear model proves inadequate or inappropriate.Modern software has made complicated modeling very easy to do, and an understanding
of the underlying theory is also important The second objective is to present students
with sufficient theoretical background so that they will recognize new variants of the
models learned about here as merely natural extensions that fit within a common body
of principles This book contains a substantial amount of theoretical material, such asthat on GMM, maximum likelihood estimation, and asymptotic results for regressionmodels
This text is intended for a one-year graduate course for social scientists uisites should include calculus, mathematical statistics, and an introduction to econo-
Prereq-metrics at the level of, say, Gujarati’s (2002) Basic EconoPrereq-metrics, Stock and Watson’s (2006) Introduction to Econometrics, Kennedy’s (2008) Guide to Econometrics, or Wooldridge’s (2009) Introductory Econometrics: A Modern Approach I assume, for ex-
ample, that the reader has already learned about the basics of econometric methodologyincluding the fundamental role of economic and statistical assumptions; the distinctionsbetween cross-section, time-series, and panel data sets; and the essential ingredients ofestimation, inference, and prediction with the multiple linear regression model Self-contained (for our purposes) summaries of the matrix algebra, mathematical statistics,and statistical theory used throughout the book are given in Appendices A through
D I rely heavily on matrix algebra throughout This may be a bit daunting to someearly on but matrix algebra is an indispensable tool and I hope the reader will come
to agree that it is a means to an end, not an end in itself With matrices, the unity of avariety of results will emerge without being obscured by a curtain of summation signs.All the matrix algebra needed in the text is presented in Appendix A Appendix E andChapter 15 contain a description of numerical methods that will be useful to practicingeconometricians (and to us in the later chapters of the book)
Contemporary computer software has made estimation of advanced nonlinear els as routine as least squares I have included five chapters on estimation methods used
mod-in current research and five chapters on applications mod-in micro- and macroeconometrics.The nonlinear models used in these fields are now the staples of the applied economet-rics literature As a consequence, this book also contains a fair amount of material thatwill extend beyond many first courses in econometrics Once again, I have included this
in the hope of laying a foundation for study of the professional literature in these areas.One overriding purpose has motivated all seven editions of this book The vastmajority of readers of this book will be users, not developers, of econometrics I be-lieve that it is simply not sufficient to recite the theory of estimation, hypothesis testing,and econometric analysis Although the often-subtle theory is extremely important,the application is equally crucial To that end, I have provided hundreds of numericalexamples My purpose in writing this work, and in my continuing efforts to update it,
is to show readers how to do econometric analysis I unabashedly accept the
unflatter-ing assessment of a correspondent who once likened this book to a “user’s guide toeconometrics.”
Trang 37PLAN OF THE BOOK
The arrangement of the book is as follows:
Part I begins the formal development of econometrics with its fundamental pillar,
the linear multiple regression model Estimation and inference with the linear least squares estimator are analyzed in Chapters 2 through 6 The nonlinear regression model
is introduced in Chapter 7 along with quantile, semi- and nonparametric regression, all
as extensions of the familiar linear model Instrumental variables estimation is developed
in Chapter 8
Part II presents three major extensions of the regression model Chapter 9 presentsthe consequences of relaxing one of the main assumptions of the linear model, ho-
moscedastic nonautocorrelated disturbances, to introduce the generalized regression
model The focus here is on heteroscedasticity; autocorrelation is mentioned, but a
de-tailed treatment is deferred to Chapter 20 in the context of time-series data Chapter 10introduces systems of regression equations, in principle, as the approach to modelingsimultaneously a set of random variables and, in practical terms, as an extension of thegeneralized linear regression model Finally, panel data methods, primarily fixed andrandom effects models of heterogeneity, are presented in Chapter 11
The second half of the book is devoted to topics that will extend the linear regressionmodel in many directions Beginning with Chapter 12, we proceed to the more involvedmethods of analysis that contemporary researchers use in analysis of “real-world” data.Chapters 12 to 16 in Part III present different estimation methodologies Chapter 12
presents an overview by making the distinctions between parametric, semiparametric and nonparametric methods The leading application of semiparametric estimation in the current literature is the generalized method of moments (GMM) estimator presented
in Chapter 13 This technique provides the platform for much of modern
economet-rics Maximum likelihood estimation is developed in Chapter 14 Monte Carlo and
simulation-based methods such as bootstrapping that have become a major
compo-nent of current research are developed in Chapter 15 Finally, Bayesian methods are
introduced in Chapter 16
Parts IV and V develop two major subfields of econometric methods,
microecono-metrics, which is typically based on cross-section and panel data, and rics, which is usually associated with analysis of time-series data In Part IV, Chapters 17
macroeconomet-to 19 are concerned with models of discrete choice, censoring, truncation, sample tion, duration, treatment effects, and the analysis of counts of events In Part V, Chap-ters 20 and 21, we consider two topics in time-series analysis, models of serial correlationand regression models for nonstationary data—the usual substance of macroeconomicanalysis
selec-REVISIONS
I have substantially rearranged the early part of the book to produce what I hope is amore natural sequence of topics for the graduate econometrics course Chapter 4 is nowdevoted entirely to point and interval estimation, including prediction and forecasting.Finite sample, then asymptotic properties of least squares are developed in detail All
Trang 38of the material on hypothesis testing and specification search is moved into Chapter 5,rather than fragmented over several chapters as in the sixth edition I have also broughtthe material on instrumental variables much farther forward in the text, from after thedevelopment of the generalized regression model in the sixth edition to Chapter 8 in thisone, immediately after full development of the linear regression model This accordswith the greater emphasis on this method in recent applications A very large number
of other rearrangements of the material will also be evident Chapter 7 now contains
a range of advanced extensions of the linear regression model, including nonlinear,quantile, partially linear, and nonparametric regression This is also a point at which thedifferences between parametric, semiparametric, and nonparametric methods can beexamined One conspicuous modification is the excision of the long chapter on linearsimultaneous equations models Some of the material from this chapter appears else-where Two-stage least squares now appears with instrumental variables estimation.Remaining parts of this chapter that are of lesser importance in recent treatments, such
as rank and order conditions for identification of linear models and 3SLS and FIMLestimation, have been deleted or greatly reduced and placed in context elsewhere in thetext The material on discrete choice models has been rearranged to orient the topics
to the behavioral foundations Chapter 17 now broadly introduces discrete choice andrandom utility models, and then builds on variants of the binary choice model Theanalysis is continued in Chapter 18 with unordered, then ordered choice models and,finally, models for counts The last chapter of the section studies models for continu-ous variables in the contexts of particular data-generating mechanisms and behavioralcontexts
I have added new material and some different examples and applications at ous points Topics that have been expanded or given greater emphasis include treat-ment effects, bootstrapping, simulation-based estimation, robust estimation, missingand faulty data, and a variety of different new methods of discrete choice analysis inmicroeconometrics I have also added or expanded material on techniques recently ofinterest, such as quantile regression and stochastic frontier models
numer-I note a few specific highlights of the revision: numer-In general terms, numer-I have increased thefocus on robust methods a bit I have placed discussions of specification tests at severalpoints, consistent with the trend in the literature to examine more closely the fragility
of heavily parametric models A few of the specific new applications are as follows:
• Chapter 15 on simulation-based estimation has been considerably expanded Itnow includes substantially more material on bootstrapping standard errors andconfidence intervals The Krinsky and Robb (1986) approach to asymptoticinference has been placed here as well
• A great deal of attention has been focused in recent papers on how to understandinteraction effects in nonlinear models Chapter 7 contains a lengthy application
of interaction effects in a nonlinear (exponential) regression model The issue isrevisited in Chapter 17
• As an exercise that will challenge the student’s facility with asymptotic
distribution theory, I have added a detailed proof of the Murphy and Topel (2002)result for two-step estimation in Chapter 14
• Sources and treatment of endogeneity appear at various points, for example anapplication of inverse probability weighting to deal with attrition in Chapter 17
Trang 39The seventh edition is a major revision of Econometric Analysis both in terms of
organization of the material and in terms of new ideas and treatments I hope thatreaders will find the changes helpful
SOFTWARE AND DATA
There are many computer programs that are widely used for the computations described
in this book All were written by econometricians or statisticians, and in general, allare regularly updated to incorporate new developments in applied econometrics Asampling of the most widely used packages and Internet home pages where you canfind information about them are
EViews www.eviews.com (QMS, Irvine, CA)
Gauss www.aptech.com (Aptech Systems, Kent, WA)
LIMDEP www.limdep.com (Econometric Software, Plainview, NY)
MATLAB www.mathworks.com (Mathworks, Natick, MA)
NLOGIT www.nlogit.com (Econometric Software, Plainview, NY)
R www.r-project.org/ (The R Project for Statistical Computing)
Shazam econometrics.com (Northwest Econometrics Ltd., Gibsons, Canada)
Stata www.stata.com (Stata, College Station, TX)
TSP www.tspintl.com (TSP International, Stanford, CA)
A more extensive list of computer software used for econometric analysis can befound at the resource Web site, http://www.oswego.edu/∼economic/econsoftware.htm.With only a few exceptions, the computations described in this book can be carried
out with any of the packages listed NLOGIT was used for the computations in the
ap-plications This text contains no instruction on using any particular program or language.(The author’s Web site for the text does provide some code and data for replication
of the numerical examples.) Many authors have produced RATS, LIMDEP/NLOGIT,
EViews, SAS, or Stata code for some of our applications, including, in a few cases,
the documentation for their computer programs There are also quite a few volumesnow specifically devoted to econometrics associated with particular packages, such asCameron and Trivedi’s (2009) companion to their treatise on microeconometrics.The data sets used in the examples are also available on the Web site for thetext, http://pages.stern.nyu.edu/∼wgreene/Text/econometricanalysis.htm Throughoutthe text, these data sets are referred to “Table Fn.m,” for example Table F4.1 The
“F” refers to Appendix F at the back of the text which contains descriptions of the datasets The actual data are posted in generic ASCII and portable formats on the Website with the other supplementary materials for the text There are now thousands ofinteresting Web sites containing software, data sets, papers, and commentary on econo-metrics It would be hopeless to attempt any kind of a survey here One code/data sitethat is particularly agreeably structured and well targeted for readers of this book is
Trang 40the data archive for the Journal of Applied Econometrics They have archived all the
nonconfidential data sets used in their publications since 1988 (with some gaps before1995) This useful site can be found at http://qed.econ.queensu.ca/jae/ Several of the
examples in the text use the JAE data sets Where we have done so, we direct the reader
to the JAE’s Web site, rather than our own, for replication Other journals have begun
to ask their authors to provide code and data to encourage replication Another vast,easy-to-navigate site for aggregate data on the U.S economy is www.economagic.com
ACKNOWLEDGMENTS
It is a pleasure to express my appreciation to those who have influenced this work I main grateful to Arthur Goldberger (dec.), Arnold Zellner (dec.), Dennis Aigner, BillBecker, and Laurits Christensen for their encouragement and guidance After seveneditions of this book, the number of individuals who have significantly improved itthrough their comments, criticisms, and encouragement has become far too large for
re-me to thank each of them individually I am grateful for their help and I hope that all
of them see their contribution to this edition I would like to acknowledge the manyreviewers of my work whose careful reading has vastly improved the book throughthis edition: Scott Atkinson, University of Georgia; Badi Baltagi, Syracuse Univer-sity; Neal Beck, New York University; William E Becker (Ret.), Indiana University;Eric J Belasko, Texas Tech University; Anil Bera, University of Illinois; John Burkett,University of Rhode Island; Leonard Carlson, Emory University; Frank Chaloupka,University of Illinois at Chicago; Chris Cornwell, University of Georgia; Craig Depken
II, University of Texas at Arlington; Frank Diebold, University of Pennsylvania;Edward Dwyer, Clemson University; Michael Ellis, Wesleyan University; Martin Evans,Georgetown University; Vahagn Galstyan, Trinity College Dublin; Paul Glewwe, Uni-versity of Minnesota; Ed Greenberg, Washington University at St Louis; Miguel Herce,University of North Carolina; Joseph Hilbe, Arizona State University; Dr Uwe Jensen,Christian-Albrecht University; K Rao Kadiyala, Purdue University; William Lott, Uni-versity of Connecticut; Thomas L Marsh, Washington State University; Edward Mathis,Villanova University; Mary McGarvey, University of Nebraska–Lincoln; Ed Melnick,New York University; Thad Mirer, State University of New York at Albany; CyrilPasche, University of Geneva; Paul Ruud, University of California at Berkeley; SherrieRhine, Federal Deposit Insurance Corp.; Terry G Seaks (Ret.), University of NorthCarolina at Greensboro; Donald Snyder, California State University at Los Angeles;Steven Stern, University of Virginia; Houston Stokes, University of Illinois at Chicago;Dmitrios Thomakos, Columbia University; Paul Wachtel, New York University; MaryBeth Walker, Georgia State University; Mark Watson, Harvard University; and Ken-neth West, University of Wisconsin My numerous discussions with Bruce McCullough
of Drexel University have improved Appendix E and at the same time increased myappreciation for numerical analysis I am especially grateful to Jan Kiviet of the Uni-versity of Amsterdam, who subjected my third edition to a microscopic examinationand provided literally scores of suggestions, virtually all of which appear herein Pro-fessor Pedro Bacao, University of Coimbra, Portugal, and Mark Strahan of Sand HillEconometrics did likewise with the sixth edition