McqMate

heteroskedasticity - Question and answers

I'm running a multiple regression model in Stata for my economics thesis and keep getting significant heteroskedasticity with the Breusch-Pagan test, even after trying robust standard errors. What's the most reliable way to correct this without losing interpretability of my coefficients?

Mathematical Economics heteroskedasticity panel-data

I'm analyzing panel data on household income and education levels across different regions from 2000 to 2020. When I use OLS with fixed effects, the Breusch-Pagan test shows p < 0.01 for heteroskedasticity. I've applied robust standard errors (vce(robust) in Stata), but the confidence intervals widen so much that some key variables become insignificant. I've also tried log-transforming variables, but it didn't fully resolve the issue. I'm worried about model misspecification and need a practical solution to proceed with my analysis.

MR

Michael Rodriguez

6 days ago