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From |
"Austin Nichols" <austinnichols@gmail.com> |

To |
statalist@hsphsun2.harvard.edu |

Subject |
Re: st: problems with Murphy-Topel |

Date |
Mon, 29 Oct 2007 13:45:39 -0400 |

Rachel-- I'm not going to address your main question (sorry). Instead, I want to offer another approach from the literature that may be closer to what you really want to model. You measure a trend in income X to see if there are long-run secular effects of increasing X on Y and then deviation from trend to see if there are contemporaneous short-run effects of X on Y, right? Try taking the first difference of X/2 and the two-period moving average of X: g dx=(x-l.x)/2 g ax=(x+l.x)/2 which two terms sum to X in the model (x=ax+dx) but decompose the effect of X into a short-run effect (the coef on dx) and a long-run effect (the coef on ax). This idea (among others) is from Michael Baker; Dwayne Benjamin; Shuchita Stanger "The Highs and Lows of the Minimum Wage Effect: A Time-Series Cross-Section Study of the Canadian Law" Journal of Labor Economics, Vol. 17, No. 2. (Apr., 1999), pp. 318-350. http://links.jstor.org/sici?sici=0734-306X%28199904%2917%3A2%3C318%3ATHALOT%3E2.0.CO%3B2-B On 10/29/07, Rachel Bouvier <rbouvier@usm.maine.edu> wrote: > Hi stata-listers: > > I'm working on a problem dealing with the Murphy-Topel procedure as > outlined in Hardin (2002) and Hole (2006). Briefly, I have a very large > stacked model in the first stage, consisting of 31 countries and up to > 17 years (some countries have a shorter time series). It is stacked so > that the intercepts and the coefficients can vary for each country, > rather than "pooling" them all. (I posted a question about this > quite a while ago, so it may seem familiar to some.) > > I use OLS to predict the trend of income over time for each country, > and call this variable "new_predict", and its square, > "new_pred2." I also generate another variable, called > "new_flux," which is made up of the residuals from the first > stage (or how far income falls from its predicted trend). I then use > those three variables from the first stage in my second stage model > (also using OLS). I need to adjust the standard errors from the second > stage model because those three variables were generated in the first > stage. > * * For searches and help try: * http://www.stata.com/support/faqs/res/findit.html * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

**References**:**st: problems with Murphy-Topel***From:*"Rachel Bouvier" <rbouvier@usm.maine.edu>

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