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Steps in Empirical Economic Analysis
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səhifə | 7/8 | tarix | 08.02.2023 | ölçüsü | 20,85 Kb. | | #83438 |
| Ekonometrika fani bilan tanishuv-fayllar.org
(cont’d)
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Step 3:
Turn it into an econometric model.
solve quantification issues
how can we measure hours spent in criminal activity?
how do we approximate the probability of being caught with an
observable economic variable?
specify the functional form of the economic relationships
example (crime vs. wage):
crime = β0 + β1 wage + β1 oth_inc + β2 freq_arr + β3 freq_conv
+ β4 avg_sen + β5 age + u
u ... error term or disturbance, which contains:
The Structure of Econometric Data
Cross-sectional data. Time series.
Pooled cross sections and panel data.
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Cross-Sectional Data
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1 observation = information about 1 cross-sectional unit
cross-sectional units: individuals, households, firms, cities, states
data taken at a given point in time
typical assumption: units form a random sample from the whole population → the notion of independence of the units’ values
possible violations:
censoring: wealthier families are less likely to disclose their wealth
small population: neighboring states influence one another, their indicators are not independent
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