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Article
Publication date: 3 August 2012

Yinao Wang, Aiqing Ruan and Zhihui Zhan

This paper aims to study the improved effect of the instrumental variable method to estimate parameters of linear regression model with the stochastic explanatory variables

Abstract

Purpose

This paper aims to study the improved effect of the instrumental variable method to estimate parameters of linear regression model with the stochastic explanatory variables problem.

Design/methodology/approach

By Monte‐Carlo method, taking a linear regression model with intercept of 3, slope of 4 as an example, whose random error in standard normal distribution, to test whether parameter estimators are biased and how about the average relative error of estimator of slope when random explanatory variables are in different contemporaneously correlated with random error item. By the instrumental variables which are independent with random error item and in varying degrees related to random explanatory variable, the study tests the estimation accuracy of the slope using the instrumental variable method.

Findings

This paper tests that the ordinary least square parameter estimators are biased, and especially that the average relative error of estimator of slope is significantly large, more than 10 percent, when random explanatory variables are different and contemporaneously correlated with the random error item. For the instrumental variables that are independent from random error item and in varying degrees related to the random explanatory variable, the estimation accuracy of the slope is significantly improved and the relative error dropped to less than 4 percent, but the estimation accuracy of the intercept term showed no significant improvement by the instrumental variable method.

Practical implications

The method exposed in the paper shows how to improve estimation by an instrumental variable method.

Originality/value

The paper succeeds in showing how to improve estimation by the instrumental variable method of numerical simulation.

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Article
Publication date: 6 August 2018

Tianli Zhong and Tianyu Zhang

The purpose of this paper is to identify if peer firms’ capital structure decision plays a role in determining focal firms’ capital structure decision, despite the fact…

Abstract

Purpose

The purpose of this paper is to identify if peer firms’ capital structure decision plays a role in determining focal firms’ capital structure decision, despite the fact that correlated effects can also lead to co-movement of financing behavior among firms from the same industry (i.e. industry-specific capital structure).

Design/methodology/approach

Instead of using relative measurement (of individual outcome variable over industry variable) as in previous work, this paper borrows the linear-in-means model and, after controlling for potential endogeneity problems, directly identifies the existence of peer effects with coefficient estimation. To deal with correlated effects, additional empirical investigations such as test of heterogeneity in direction and scale, social multiplier identification test and instrumental regression test based on another instrumental variable (that is less influenced by correlated effects) are performed.

Findings

Using data from Chinese listed firms, this paper, for the first time, identifies the presence of peer effects in capital structure and debt maturity decision. Further investigations show that first, focal firms react asymmetrically to peer firms’ debt adjustment of different direction and scale. Second, social multiplier, a unique attribute of peer effects, is identified in the leverage choices. Third, the significant correlation of capital structure decision remains even if we use another “correlated effects-immune” instrument. All these results point to the fact that peer effects, rather than correlated effects, play a significant role in determining capital structure.

Practical implications

The empirical results of this paper provide strong evidence that firms, driven by motivations such as either learning or competition, will actively react to peers’ financial decisions. As the bridge between individual firms and the industry, social multiplier can be fully taken advantage of to induce positive spillover of good management practices and prohibit inefficient decisions from spreading.

Originality/value

This paper theoretically and empirically introduces peer effects – a well-acknowledged social concept – into capital structure decision of Chinese listed firms, thus both complementing the traditional capital structure theory and providing an empirical paradigm for peer effects research.

Details

Nankai Business Review International, vol. 9 no. 3
Type: Research Article
ISSN: 2040-8749

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Article
Publication date: 25 October 2020

Darryl L. Chambers, Yasser A. Payne and Ivan Sun

While the past few decades have witnessed a substantial number of studies on public attitudes toward the police, a relatively thin line of inquiry has focused exclusively…

Abstract

Purpose

While the past few decades have witnessed a substantial number of studies on public attitudes toward the police, a relatively thin line of inquiry has focused exclusively on low income urban Black-Americans, and especially street-identified Black populations. The purpose of this paper, however, is to examine trust in police amongst street-identified Black men and women.

Design/methodology/approach

Relying on a street participatory action research methodological approach, the authors collected survey data (N = 520) from two low-income unban Black neighborhoods, to examine the effects of an instrumental model versus an expressive model on procedural- and outcome-based trust in police.

Findings

The findings suggested a community sample of street-identified Black men and women were able to differentiate between procedural- and outcome-based trust. The instrumental model was better in predicting procedural-based trust in police, while the expressive model accounted better for outcome-based trust in police.

Research limitations/implications

Implications for street participatory action research methodology, future research and policy are also discussed.

Originality/value

This paper is an original manuscript.

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Article
Publication date: 25 November 2013

Jack K. Ito, Céleste M. Brotheridge and Kathie McFarland

The aim of this paper is to address three broad questions: Are preferences for branding attributes similar for entry and for retention? Are there generational and career…

Abstract

Purpose

The aim of this paper is to address three broad questions: Are preferences for branding attributes similar for entry and for retention? Are there generational and career stage differences in one's entry and exit priorities? How is current satisfaction with brand image attributes related to overall commitment, satisfaction and retention?

Design/methodology/approach

This paper reports on the results of a survey of 144 workers employed at 37 day care centers in a medium sized Canadian city.

Findings

Although the level of respondents' priorities for entry and exit differed, most priorities remained in the same order. However, their perspectives were more disaggregated for entry than for exit, where branding attributes were more strongly correlated. Consistent with the exploration stage of career development, younger people planned to stay a shorter length of time with a particular center.

Research limitations/implications

This study includes only child care workers in a small geographic region. Future research should be undertaken in larger scale firms that also offer greater heterogeneity in professions as well as career options. Also, a longitudinal study that follows new entrants for several years, using both instrumental and symbolic measures, would provide information on what attracted individuals and what influenced their intention to leave.

Practical implications

Although there were few differences by age or career stage, the variation within each factor suggests that a brand image may need to be relatively broad to accommodate diversity. HR practitioners can use the practice symbolic pattern to build and maintain a culture that is attractive to present and prospective employees. The opposite symbolic practice pattern may help current employees understand reasons for new practices.

Originality/value

Organizations face significant challenges in designing programs for recruitment and retention. This study considers how employees' to two questions – “why do people enter the organization” and “why do people remain?” – may differ.

Details

Career Development International, vol. 18 no. 7
Type: Research Article
ISSN: 1362-0436

Keywords

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Book part
Publication date: 19 December 2012

R. Kelley Pace, James P. LeSage and Shuang Zhu

Most spatial econometrics work focuses on spatial dependence in the regressand or disturbances. However, Lesage and Pace (2009) as well as Pace and LeSage2009 showed that…

Abstract

Most spatial econometrics work focuses on spatial dependence in the regressand or disturbances. However, Lesage and Pace (2009) as well as Pace and LeSage2009 showed that the bias in β from applying OLS to a regressand generated from a spatial autoregressive process was exacerbated by spatial dependence in the regressor. Also, the marginal likelihood function or restricted maximum likelihood (REML) function includes a determinant term involving the regressors. Therefore, high dependence in the regressor may affect the likelihood through this term. In addition, Bowden and Turkington (1984) showed that regressor temporal autocorrelation had a non-monotonic effect on instrumental variable estimators.

We provide empirical evidence that many common economic variables used as regressors (e.g., income, race, and employment) exhibit high levels of spatial dependence. Based on this observation, we conduct a Monte Carlo study of maximum likelihood (ML), REML and two instrumental variable specifications for spatial autoregressive (SAR) and spatial Durbin models (SDM) in the presence of spatially correlated regressors.

Findings indicate that as spatial dependence in the regressor rises, REML outperforms ML and that performance of the instrumental variable methods suffer. The combination of correlated regressors and the SDM specification provides a challenging environment for instrumental variable techniques.

We also examine estimates of marginal effects and show that these behave better than estimates of the underlying model parameters used to construct marginal effects estimates. Suggestions for improving design of Monte Carlo experiments are provided.

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Book part
Publication date: 30 May 2018

Cheti Nicoletti, Kjell G. Salvanes and Emma Tominey

We estimate the parental investment response to the child endowment at birth, by analysing the effect of child birth weight on the hours worked by the mother two years…

Abstract

We estimate the parental investment response to the child endowment at birth, by analysing the effect of child birth weight on the hours worked by the mother two years after birth. Mother’s working hours soon after child birth are a measure of investments in their children as a decrease (increase) in hours raises (lowers) her time investment in the child. The child birth endowment is endogenously determined in part by unobserved traits of parents, such as investments during pregnancy. We adopt an instrumental variables estimation. Our instrumental variables are measures of the father’s health endowment at birth, which drive child birth weight through genetic transmission but does not affect directly the mother’s postnatal investments, conditional on maternal and paternal human capital and prenatal investments. We find an inverted U-shape relationship between mothers worked hours and birth weight, suggesting that both low and extremely high child birth weight are associated with child health issues for which mothers compensate by reducing their labour supply. The mother’s compensating response to child birth weight seems slightly attenuated for second and later born children. Our study contributes to the literature on the response of parental investments to child’s health at birth by proposing new and more credible instrumental variables for the child health endowment at birth and allowing for a heterogeneous response of the mother’s investment for first born and later born children.

Details

Health Econometrics
Type: Book
ISBN: 978-1-78714-541-2

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Book part
Publication date: 9 November 2020

Kata Orosz, Viorel Proteasa and Daniela Crăciun

Higher education researchers are often challenged by the difficulty of empirically validating causal links posited by theories or inferred from correlational observations…

Abstract

Higher education researchers are often challenged by the difficulty of empirically validating causal links posited by theories or inferred from correlational observations. The instrumental variable (IV) estimation strategy is one approach that researchers can use to estimate the causal impact of various higher education–related interventions. In this chapter, we discuss how the body of quantitative research specifically devoted to higher education has made use of the IV estimation strategy: we describe how this estimation strategy was used to address causality concerns and provide examples of the types of IVs that were used in various subfields of higher education research. Our discussion is based on a systematic review of a corpus of econometric studies on higher education–related issues that spans the last 30 years. The chapter concludes with a critical discussion of the use of IVs in quantitative higher education research and a discussion of good practices when using an IV estimation strategy.

Details

Theory and Method in Higher Education Research
Type: Book
ISBN: 978-1-80043-321-2

Keywords

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Article
Publication date: 1 December 2020

Carolina Pasciaroni and Andrea Barbero

This paper aims to analyse the influence of cooperation on the degree of novelty of technological innovations introduced by industrial firms in Argentina. This influence…

Abstract

Purpose

This paper aims to analyse the influence of cooperation on the degree of novelty of technological innovations introduced by industrial firms in Argentina. This influence is analysed from three perspectives: cooperation by partner type [business partners or scientific and technological centres (S&T) partners]; cooperation by number of partner types, from no cooperation to cooperation with two partner types; and cooperation by goals pursued by firms.

Design/methodology/approach

The data come from one of the last national innovation surveys conducted in Argentina. The study controls for endogeneity, using instrumental variable procedures within the conditional mixed-process (CMP) framework.

Findings

The main result is the influence of cooperation with universities and S&T centres on the introduction of more novel innovations, which was found both in estimations with and without endogeneity correction. This influence was verified for more complex goals (R&D, technology transfer and industrial design and engineering) as well as for less complex ones (tests and trials, human resources training, quality management and certification). Business cooperation seems to impact only on a lower degree of novelty for more complex goals. The increase in the number of partners that the firm cooperates with, from no cooperation to joint cooperation with two partner types, influences more novel innovations.

Research limitations/implications

Limitations and proposals for future research are discussed at the end of the study.

Practical implications

The results of this study contrast with the high propensity to cooperate with business partners shown by firms in Argentina and other Latin American countries. Therefore, this paper may help formulate more effective policies to promote cooperation conducive to firm innovation performance. Limitations and proposals for future research are discussed at the end of the study.

Originality/value

Although there is empirical evidence on this topic for developed countries, firm-level studies on cooperation and degree of novelty are scarce for Latin America. In addition, this paper analyses cooperation not only by type of partner but also by type of goal. This study attempted to control for endogeneity by using instrumental variables within the CMP framework.

Details

Journal of Science and Technology Policy Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2053-4620

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Article
Publication date: 13 November 2019

Kunling Zhang, Chunlai Chen, Jian Ding and Zhinan Zhang

The purpose of this paper is to evaluate the economic impacts of China’s hukou system and propose the possible direction for future reform.

Abstract

Purpose

The purpose of this paper is to evaluate the economic impacts of China’s hukou system and propose the possible direction for future reform.

Design/methodology/approach

The study develops a framework to incorporate the hukou system into the economic growth model. Using prefecture city-level panel data covering 241 cities over the period 2004–2016 and applying the fixed effects and instrumental variable regression techniques, the authors investigated empirically the impacts of the hukou system on city economic growth.

Findings

The study provides three main findings. First, the city sector conditionally benefits from labour mobility deregulation that allows migrants to work in cities. Second, the hukou system has different impacts on economic growth among cities with different sizes and administrative levels. Third, to offset the costs of providing exclusive public services to the migrants, the big or high-administrative-level cities can use their high-valued hukou to attract the high-skilled migrants, but the small- or low-administrative-level cities do not have this advantage.

Practical implications

This study suggests that the key for further hukou system reform is how to deal with the hukou–welfare binding relationship.

Originality/value

The authors developed a theoretical framework and conducted an empirical analysis on the direct relationship between the hukou system and economic growth to reveal the mechanism of how does the hukou system influence the city economic growth and answer the question of why is the hukou system reform so hard in China. The framework also sheds some lights on explaining the success and failure of the hukou system reforms in the past 40 years.

Details

China Agricultural Economic Review, vol. 12 no. 1
Type: Research Article
ISSN: 1756-137X

Keywords

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Book part
Publication date: 30 January 2013

Gary N. Marks

Since the early 1990s there has been a growing body of research on intergenerational income elasticities and correlations. One of the most prominent findings is that these…

Abstract

Since the early 1990s there has been a growing body of research on intergenerational income elasticities and correlations. One of the most prominent findings is that these associations are much higher in the United States (and the United Kingdom) than in Canada, Australia and many European countries. This finding is often interpreted as America being much less fair than other industrialized societies since the reproduction of economic inequalities is substantially stronger. This chapter questions these conclusions on the following grounds: (i) inconsistencies with other outcomes, such as socio-economic inequalities in student achievement, educational attainment, occupation attainment and the patterning of intergenerational occupational mobility, (ii) family income having weaker effects on educational attainment (which has substantial effects on earnings and income) than other parental characteristics and (iii) methodological issues such as estimates based on the concept of ‘permanent income’ and the use of instrumental variables. Even if the consensus estimate of 0.4 for the intergenerational correlation in the United States is accepted, it may not mean that the United States is unusually unfair due to larger regional differences in labour market returns and/or stronger associations between parents’ and their children's ability, ability and education attainment, and education and earnings.

Details

Class and Stratification Analysis
Type: Book
ISBN: 978-1-78190-537-1

Keywords

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