# Re: st: AW: AW: Creating a variable taking the value of elasticity

 From Dorothy Bridges <[email protected]> To [email protected] Subject Re: st: AW: AW: Creating a variable taking the value of elasticity Date Tue, 8 Sep 2009 12:31:41 -0400

```Yes, clearly I need to give this more thought -- thanks again all for
the coding assistance.

On Tue, Sep 8, 2009 at 12:02 PM, Austin Nichols<[email protected]> wrote:
> Dorothy Bridges<[email protected]>:
> The main problem I see there is one of inferring causality--does an
> exogenous increase in GDP cause an increase in "health" or does an
> increase in "health" cause increased production or does some other
> factor increase both?  You might want -xtivreg- but then you need
> appropriate excluded instruments...
>
> On Tue, Sep 8, 2009 at 11:10 AM, Dorothy Bridges<[email protected]> wrote:
>> Thanks so much, everyone, that answers my question.  (And thanks Roger
>> for pointing me to the helpful package).  I have one last question: I
>> am trying to understand the "elasticity" of a health indicator with
>> respect to GDP (that is, how does a marginal increase in GDP affect
>> the health indicator?).  If I regress ln(healthindicator) on ln(gdp),
>> is the coefficient on ln(gdp) an appropriate way of measuring this
>> elasticity?  I realize this is more of an econometrics question than a
>> Stata question, but everyone has been so helpful I thought I'd might
>>
>> Thanks again,
>> Dorothy
>>
>> On Tue, Sep 8, 2009 at 10:52 AM, Austin Nichols<[email protected]> wrote:
>>> Dorothy Bridges<[email protected]>:
>>> The linear model and the log-log model make very different assumptions
>>> about the data-generating process, so you should not expect to get the
>>> same estimates from them.  -mfx- after a linear model in particular
>>> will give approximate estimates that are very questionable--note that
>>> if the true model is
>>> y=Xb+e
>>> then the elasticity of y with respect to x (a variable, or column of
>>> X) will vary as x varies.
>>>
>>> On Tue, Sep 8, 2009 at 10:32 AM, Dorothy Bridges<[email protected]> wrote:
>>>   I still
>>>> don't see, then, how mfx, eyex gives me a value different than the
>>>> coefficient on lnx in regress lny lnx.  Thanks again for all your
>>>> thoughts.
>
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