Building Better Econometric Models Using Cross Section and Panel Data

Many empirical researchers yearn for an econometricmodel that better explains their data. Yet these researchersrarely pursue this objective for fear of thestatistical complexities involved in specifying thatmodel. This book is intended to alleviate those anxietiesby providing a practical methodology that anyonefamiliar with regression analysis can employ-amethodology that will yield a model that is both moreinformative and is a better representation of the data. This book outlines simple, practical proceduresthat can be used to specify a model that better explainsthe data. Such procedures employ the use ofpurely statistical techniques performed upon a publiclyavailable data set, which allows readers to followalong at every stage of the procedure. Using theeconometric software Stata (though most other statisticalsoftware packages can be used as well), thisbook demonstrates how to test for model misspecificationand how to respecify these models in a practicalway that not only enhances the inference drawnfrom the results, but adds a level of robustness thatcan increase the researcher's confidence in the outputgenerated. By following this procedure, researcherswill be led to a better, more finely tuned empiricalmodel that yields better results.