Building Better Econometric Models Using Cross Section and Panel Data

Many empirical researchers yearn for an econometric

model that better explains their data. Yet these researchers

rarely pursue this objective for fear of the

statistical complexities involved in specifying that

model. This book is intended to alleviate those anxieties

by providing a practical methodology that anyone

familiar with regression analysis can employ—a

methodology that will yield a model that is both more

informative and is a better representation of the data.

This book outlines simple, practical procedures

that can be used to specify a model that better explains

the data. Such procedures employ the use of

purely statistical techniques performed upon a publicly

available data set, which allows readers to follow

along at every stage of the procedure. Using the

econometric software Stata (though most other statistical

software packages can be used as well), this

book demonstrates how to test for model misspecification

and how to respecify these models in a practical

way that not only enhances the inference drawn

from the results, but adds a level of robustness that

can increase the researcher’s confidence in the output

generated. By following this procedure, researchers

will be led to a better, more finely tuned empirical

model that yields better results.