Robust Inference for Misspecified Models Conditional on Covariates
25 Pages Posted: 23 Sep 2011 Last revised: 27 Feb 2023
Date Written: September 2011
Abstract
Following the work by White (1980ab; 1982) it is common in empirical work in economics to report standard errors that are robust against general misspecification. In a regression setting these standard errors are valid for the parameter that in the population minimizes the squared difference between the conditional expectation and the linear approximation, averaged over the population distribution of the covariates. In nonlinear settings a similar interpretation applies. In this note we discuss an alternative parameter that corresponds to the approximation to the conditional expectation based on minimization of the squared difference averaged over the sample, rather than the population, distribution of a subset of the variables. We argue that in some cases this may be a more interesting parameter. We derive the asymptotic variance for this parameter, generally smaller than the White robust variance, and we propose a consistent estimator for the asymptotic variance.
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Toward an Understanding of the Economics of Charity: Evidence from a Field Experiment
By Craig E. Landry, Andreas Lange, ...
-
What's Psychology Worth? A Field Experiment in the Consumer Credit Market
By Marianne Bertrand, Dean S. Karlan, ...
-
What's Psychology Worth? A Field Experiment in the Consumer Credit Market
By Dean Karlin, Marianne Bertrand, ...
-
Does Price Matter in Charitable Giving? Evidence from a Large-Scale Natural Field Experiment
By Dean S. Karlan and John A. List
-
Does Price Matter in Charitable Giving? Evidence from a Large-Scale Natural Field Experiment
By Dean S. Karlan and John A. List
-
Rebates Versus Matching: Does How We Subsidize Charitable Contributions Matter?
-
Charitable Giving and Income Taxation in a Life-Cycle Model: An Analysis of Panel Data
By Gerald Auten, Holger Sieg, ...