Heteroskedasticity-Robust Elasticities in Logarithmic and Two-Part Models

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Heteroskedasticity-Robust Elasticities in Logarithmic and Two-Part Models

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dc.contributor.author Hertz, Tom
dc.date.accessioned 2009-02-20T17:33:45Z
dc.date.available 2009-02-20T17:33:45Z
dc.date.created 2007
dc.date.issued 2007
dc.identifier.uri http://hdl.handle.net/1961/5001
dc.description Working paper No. 2007-19. 13 pages. en
dc.description.abstract Logarithmic models are widely used to study highly skewed positive outcomes, either alone or in combination with an equation that first distinguishes between zero and non-zero values (the two part model). A well-known drawback of such models is that to obtain marginal effects that pertain to the arithmetic mean, rather than the mean of logs, we must exponentiate, and this retransformation is complicated in the presence of heteroskedasticity. This paper presents a simple method for correcting estimated elasticities for the effects of heteroskedasticity, in both log-linear and log-log (constant elasticity) equations. An example, drawing on Bulgarian farm survey data, demonstrates that this correction leads to significantly different estimates of the elasticity of expenditures on agricultural inputs with respect to land area and the age of the household head. en
dc.description.sponsorship Department of Economics, American University en
dc.language.iso en_US en
dc.publisher Department of Economics, American University en
dc.rights Copyright © 2007 by Tom Hertz and Tamara Jayasundera. All rights reserved. Readers may make verbatim copies of this document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies. en
dc.title Heteroskedasticity-Robust Elasticities in Logarithmic and Two-Part Models en
dc.type Working Paper en


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