Using "Shares" vs. "Log of Shares" in Fixed-Effect Estimations

Christer Gerdes

No 5171, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper looks at potential implications emerging from including "shares" as a control variable in fixed effect estimations. By shares I refer to the ratio of a sum of units over another, such as the share of immigrants in a city or school. As will be shown in this paper, a logarithmic transformation of shares has some methodological merits as compared to the use of shares defined as mere ratios. In certain empirical settings the use of the latter might result in coefficient estimates that, spuriously, are statistically significant more often than they should.

Keywords: spurious significance; symmetry; Törnqvist index; consistency (search for similar items in EconPapers)
JEL-codes: C23 C29 J10 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2010-09
New Economics Papers: this item is included in nep-ecm
References: View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published - published in: Journal of Economics and Econometrics, 2011, 54 (1), 1–7

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Journal Article: Using “shares” vs. “log of shares” in fixed-effect estimations (2011)
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