Category: Uncategorized

Suppose you have the following estimable equation:

(1) [math]y_{it} = \alpha_{i} + \beta {x}_{it} + \epsilon_{it}[/math].

This is a pretty standard equation when dealing with panel data: [math]i[/math] denotes an individual in the set [math]i \in \{1,…,N\}[/math], [math]t[/math] denotes the time period in the set [math]t \in \{1,…,T\}[/math], [math]y[/math] is an outcome of interest (say, wage), [math]x[/math] is a variable of interest (say, an indicator variable for whether someone has a college degree), [math]\alpha[/math] is an individual fixed effect, and [math]\epsilon[/math] is an error term with mean zero. Normally with longitudinal data, it is the case that [math]N > T[/math], so that there are more individuals in the data than there are time periods. (If [math]T > N[/math], you are likely dealing more with a time-series problem than with a typical applied micro problem.)

Though we are normally interested in estimating and identifying the relationship between the variable of interest [math]x[/math] and the outcome variable [math]y[/math], I wanted to focus today on heteroskedasticity.*

Last week, in the first half of this two-part post, I talked about the method developed by Conley et al. (2012) to deal with departures from the assumption of strict exogeneity of an instrumental variable (IVs)–that is, to deal with what Conley et al. (2012) refer to as “plausibly exogenous” IVs.

How to deal with an imperfect instrument was an idea whose time apparently had come in 2012: In the same volume of the same journal, Nevo and Rosen (2012) develop an alternative method for dealing with imperfect IVs, which is what I wanted to discuss this week.

In what looks to be its inaugural issue, Nature Human Behaviour–a new social science journal published by the Nature group–discusses some of the research I and other economists have done on the topic of female genital cutting (FGC).

In short, the article’s angle is that, contra a popular theory that holds that FGC persistence is due to community-level factors, the persistence of FGC seems to come from individual and household-level factors:

Some economists say it’s time for a new approach. Their work, itself controversial, questions long-held views on FGC — that communities either all follow the practice, or all give it up – and thereby challenges the very underpinnings of many interventions.

Interventions should stop trying, as most do, to sway entire villages, these scientists say. They should instead target cracks in support for the practice: the influential community leader who has decided his daughters will not be cut, or the husband and wife who are divided on the fate of their daughters.

The article also talks about some of the research that my PhD student Lindsey Novak* has done on FGC in her job-marker paper: