David Benatia, Christophe Bellégo, Louis Pape
arXiv 22 Mar 2022 · Econometrics · 46 citations (OpenAlex)
arXiv:2203.11820 · PDF · DOI · OpenAlex · Extracted main text
The log transformation is widely used in linear regression, mainly because coefficients are interpretable as proportional effects. Yet this practice has fundamental limitations, most notably that the log is undefined at zero, creating an identification problem. We propose a new estimator, iterated OLS (iOLS), which targets the normalized average treatment effect, preserving the percentage-change interpretation while addressing these limitations. Our procedure is the theoretically justified analogue of the ad-hoc log(1+Y) transformation and delivers a consistent and asymptotically normal estimator of the parameters of the exponential conditional mean model. iOLS is computationally efficient, globally convergent, and free of the incidental-parameter bias, while extending naturally to endogenous regressors through iterated 2SLS. We illustrate the methods with simulations and revisit three influential publications.
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The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | Koen Jochmans \ Vincenzo Verardi (2022) Instrumental-variable estimation of exponential-regression models with two-way fixed effects with an application to gravity equa… | 1.000 | 8 | 3 | 100% |
| 2 | Koen Jochmans (2017) Two-way models for gravity | 1.000 | 7 | 3 | 100% |
| 3 | Martin Weidner \ Thomas Zylkin (2021) Bias and Consistency in Three-Way Gravity Models | 1.000 | 7 | 3 | 100% |
| 4 | Iván Fernández-Val \ Martin Weidner (2016) Individual and Time Effects in Nonlinear Panel Models with Large N, T | 1.000 | 5 | 3 | 100% |
| 5 | Jeff Dominitz \ Robert P. Sherman (2005) Some Convergence Theory for Iterative Estimation Procedures with an Application to Semiparametric Estimation | 0.811 | 4 | 2 | 100% |
| 6 | Willard G Manning \ John Mullahy (2001) Estimating Log Models: to Transform or not to Transform? | 0.811 | 4 | 2 | 100% |
| 7 | John Mullahy (1997) Instrumental-Variable Estimation of Count Data models: Applications to Models of Cigarette Smoking Behavior | 0.811 | 4 | 2 | 100% |
| 8 | F. A. G. Windmeijer \ J. M. C. Santos Silva (1997) Endogeneity in Count Data Models: An Application to Demand for Health Care | 0.811 | 4 | 2 | 100% |
| 9 | Peter E. Kennedy (1981) Estimation with Correctly Interpreted Dummy Variables in Semilogarithmic Equations | 0.737 | 3 | 2 | 100% |
| 10 | McKinley L. Blackburn (2007) Estimating wage differentials without logarithms | 0.644 | 2 | 2 | 100% |
Showing the top 10 of 41 scored citations.
arXiv econ.EM papers that cite this one, ranked by how heavily they lean on it.
| Citing paper | Intensity | Mentions | Sections | |
|---|---|---|---|---|
| 1 | Quantitative methods in finance | 0.405 | 1 | 1 |
| 2 | Logs with zeros? Some problems and solutions | 0.000 | 1 | 1 |