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Demand for Refined Lead

The Review of Economics and Statistics 1969 51(3), 374 open access
This paper is part of a Ph.D. dissertation submitted by the author to the Graduate College, University of Iowa, and was partially supported by the National Science Foundation Grant GS-1491. The author acknowledges the guidance and encouragement received from Professor S. Y. Wu.

An Alternative Asymptotic Analysis of Residual-Based Statistics

The Review of Economics and Statistics 2012 94(1), 88-99
This paper presents an alternative method to derive the limiting distribution of residual-based statistics. Our method does not impose an explicit assumption of (asymptotic) smoothness of the statistic of interest with respect to the model's parameters and thus is especially useful in cases where such smoothness is difficult to establish. Instead, we use a locally uniform convergence in distribution condition, which is automatically satisfied by residual-based specification test statistics. To illustrate, we derive the limiting distribution of a new functional form specification test for discrete choice models, as well as a runs-based tests for conditional symmetry in dynamic volatility models.

Trade, Gravity, and Aggregation

The Review of Economics and Statistics 2024 106(5), 1418-1426
Gravity equations are an important tool in empirical international trade research. We study to what extent sector-level parameters can be recovered from aggregate gravity equations estimated via Poisson pseudo maximum likelihood. We show that in the leading case where trade cost regressors do not vary at the sector level, estimates obtained with aggregate data have a clear interpretation as a weighted average of sectoral elasticities. Otherwise the estimates are biased, but researchers may possibly infer the direction of the bias. We illustrate our results by revisiting Baier and Bergstrand’s (2007) influential study of the effects of free trade agreements.

Are Minimum Wages a Silent Killer? New Evidence on Drunk Driving Fatalities

The Review of Economics and Statistics 2019 101(1), 192-199 open access
In volume 94 of this REVIEW, Adams, Blackburn, and Cotti (ABC), using Fatal Accident Reporting System data from 1998 to 2006, find that a 10% increase in the minimum wage is associated with a 7% to 11% increase in alcohol-related fatal traffic accidents involving teen drivers. We find this result does not hold when the analysis period is expanded to include 1991 through 2013. In addition, auxiliary analyses provide no support for income-driven increases in alcohol consumption, the primary mechanism posited by ABC. Together, our results suggest that minimum wage increases are not a silent killer.

Misspecified Exponential Regressions: Estimation, Interpretation, and Average Marginal Effects

The Review of Economics and Statistics 2024
Exponential regressions are frequently used when outcomes are non-negative. They are attractive because they are easy to interpret and to estimate, using pseudo maximum likelihood (PML). However, the validity of these methods depends on the correct specification of the conditional expectation, and little is known regarding their properties when the conditional expectation is misspecified. We show that PML estimators of misspecified exponential models provide optimal approximations to the conditional expectation, in a weighted mean squared error sense, and we give conditions under which their Poisson PML estimator identifies average marginal effects.

The Log of Gravity

The Review of Economics and Statistics 2006 88(4), 641-658 open access
Although economists have long been aware of Jensen's inequality, many econometric applications have neglected an important implication of it: under heteroskedasticity, the parameters of log-linearized models estimated by OLS lead to biased estimates of the true elasticities. We explain why this problem arises and propose an appropriate estimator. Our criticism of conventional practices and the proposed solution extend to a broad range of applications where log-linearized equations are estimated. We develop the argument using one particular illustration, the gravity equation for trade. We find significant differences between estimates obtained with the proposed estimator and those obtained with the traditional method.