Rescuing Observed Fixed Effects: Using the Hausman-Taylor Method for Out-of-Sample Trade Projections

McPherson, Matthew Q.; Trumbull, William N.

doi:10.1080/08853900802191389

Cited by 21 publications

(16 citation statements)

References 19 publications

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“…First, in panel data estimations, OLS estimators may be biased due to endogeneity resulting from the correlation between explanatory variables and time-invariant omitted variables. This has been shown to be true in a variety of contexts (Cheng & Wall, 2002;McPherson & Trumbull, 2008). In our article, it is possible that unobserved and fixed household characteristics are correlated with social networks and attitudes or with exposure to shocks.…”

Section: Endogeneity and Empirical Techniquesmentioning

confidence: 59%

The Role of Social Capital in Risk-Sharing

Petríková¹

2013

Journal of South Asian Development

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This article evaluates the role of social capital as a risk-coping device in India's Andhra Pradesh state. Focusing on children's nutritional outcomes, we test whether social capital serves as an informal insurance mechanism and helps households minimize the negative effect of shocks. We examine the impact of two kinds of income shocks, idiosyncratic and covariant, and the potentially risk-mitigating role of two types of social capital, structural and cognitive, measured first at the individual and second at the community level. The econometric methods we employ include fixed effects, random effects, and a Hausman-Taylor specification. We find that individuallevel structural and community-level cognitive social capital significantly mitigate the negative effect of idiosyncratic shocks, suggesting that persons with stronger social networks and/or living in more closely-knit communities are better informally insured against individual income shocks. On the other hand, community-level structural social capital appears to fulfil a similar role in the aftermath of covariant shocks. The underlying rationale might be that communities with more social organization are better able to negotiate with public authorities to receive help after community-wide disasters. We conclude by considering the findings within the local context of Andhra Pradesh and drawing relevant policy recommendations.

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Section: Endogeneity and Empirical Techniquesmentioning

confidence: 59%

The Role of Social Capital in Risk-Sharing

Petríková¹

2013

Journal of South Asian Development

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“…Verbeek and Nijman (1992) suggest including three variables in the estimated specifications to test and correct the selection bias: PRES ij , the 12 See Greene (2003) and Baltagi (2005) for a detailed presentation of the HT estimator. This estimator has been used by Carrère (2006) andMcPherson andTrumbull (2008) for gravity models estimated on goods and Walsh (2008) and Bouvatier (2014) for gravity models estimated on services. 13 The distinction between time-variant variables and time-invariant variables is also made in the implementation of the HT estimator.…”

Section: Estimation Methodologymentioning

confidence: 99%

Waves of international banking integration: A tale of regional differences

Bouvatier

Delatte

2015

European Economic Review

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We propose an original measure of international banking integration based on gravity equations and a spline function on a panel of 14 countries and their 186 partners between 1999 and 2012. Contrary to the conventional wisdom, we uncover that: (1) the interna-tional banking integration outside the euro area has been tenaciously increasing since\1999 and has even strengthened after the crisis. (2) In contrast, the international banking integration of the euro area has been cyclical since 1999 with a peak in 2006 and a complete reversal since then. (3) This decline is not a correction of previous overshooting but a marked disintegration. (4) Outside the euro area, the level of income does not affect the shape of banking integration.

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“…To test the efficiency of the models between fixed effects, random effects and Hausman-Taylor, we show the Hausman test in Table A2 in the annex. The Hausman-Taylor estimation is a panel estimation of random effects with instrumental variables (Baltagi, Bresson, and Pirotte, 2003;McPherson and Trumbull, 2008). The null hypothesis in the Hausman test of comparing fixed effects and random effects does not longer holds if there is a correlation between the observable and unobservable variables, which would imply that the random effects methodology is not recommended.…”

Section: Resultsmentioning

confidence: 99%

Initial Management of COVID-19 Outbreak in Mexico

Olvera

García

2021

REMEF

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This paper analyzes the initial stage of the pandemic COVID-19 in Mexico. The objective is to test whether the contagion risk perception and the authorities' initial prevention messages influenced the COVID-19 deaths. We estimate longitudinal elasticities of deaths to confirmed COVID-19 cases by accounting for measurement error and endogeneity issues. We find that confirmed cases and poverty levels are endogenous. The limitation arises because of the underreported COVID-19 deaths. Our contribution is to identify an association with the individual and political risk perception to the number of COVID-19 deaths. The results show that municipalities with more confirmed cases aware of being in contact with another person affected by COVID-19 have fewer deaths. However, emergency management, federal and state, had weak effects of reducing the lethality rate. We infer that better individual risk awareness is an essential factor in reducing the number of deaths from COVID-19.

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Rescuing Observed Fixed Effects: Using the Hausman-Taylor Method for Out-of-Sample Trade Projections

Cited by 21 publications

References 19 publications

The Role of Social Capital in Risk-Sharing

The Role of Social Capital in Risk-Sharing

Waves of international banking integration: A tale of regional differences

Initial Management of COVID-19 Outbreak in Mexico

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