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That paper does not give a lot of motivation for why it uses the control that most strongly changes the results: heterogeneous (space) time variance. Why would
by fiter 9y ago
That paper does not give a lot of motivation for why it uses the control that most strongly changes the results: heterogeneous (space) time variance. Why would it look like minimum wage increases decrease employment when considering US macroeconomic trends, but not when considering finer grained trends? If you increase your minimum wage you're losing out on employment compared to the US as a whole but locally there's no change in employment levels.
- crdoconnor 9y agoIt does give the motivation: "We show that this heterogeneity is spatial in nature. We also show that in the presence of such spatial heterogeneity, the precision of the individual case study estimates is overstated. By essentially pooling all such local comparisons and allowing for spatial autocorrelation, we address the dual problems of omitted variables bias and bias in the estimated standard errors"
- fiter 9y agoThat states an intuitive statistical fact about spacial unevenness of economics but it does not necessarily correspond to a reasoning why you should add it as a variable. Based on the abstract of this paper, we don't know whether adding a variable will decrease or increase the bias: http://www.sas.rochester.edu/psc/clarke/405/Omit.pdf http://www.sas.rochester.edu/psc/clarke/405/Omit.pdf