<p>Your approach seems no good. Let us make it really simple: You have only the dependent variable and you want to compare the averages across countries. You keep the firms whose $y$ values are inside the range. By doing this, you are (sort of) equating $y$ values, which you aimed to compare. This is strange. In fact, this leads to endogenous sample-selection.</p>

<p>It seems, however, acceptable to keep only comparable firms (rather than firm-year) based on the exogenous variables.</p>

CC BY-SA 4.0
2018-06-01T08:09:41.970Z
Fully agree. Apart from a few exceptions (e.g. dropping people with negative incomes), selection on the dependent variable usually leads to heavily biased results.
E. Sommer
CC BY-SA 4.0
2018-05-31T14:08:19.573Z
2018-05-31T14:08:19.573Z
chan1142
<p>As a small part of a project, I have been asked to tailor a large panel dataset I have built into a form that is more comparable to one specific country.</p>

<p>So I have done the following:</p>

<p>Look at the ranges of my dependent variable, explanatory variables and controls for the country of interest. </p>

<p>Drop any firm-time observations that fall outside the ranges of any of these variables.</p>

<p>Run my regression on the truncated sample.</p>

<p>I was wondering whether there are any serious cons of this approach - particularly given that my method will include only a subset of the observations for some firms. Bear in mind that this is meant to provide a rough and ready indication rather than be a super robust exercise.</p>

<p>Many thanks for your help.</p>

<econometrics>
Creating a tailored sample from panel data
user18188
# Creating a tailored sample from panel data

(Asked by: username_0 on 2018-05-08)

As a small part of a project, I have been asked to tailor a large panel dataset I have built into a form that is more comparable to one specific country.

So I have done the following:

Look at the ranges of my dependent variable, explanatory variables and controls for the country of interest.

Drop any firm-time observations that fall outside the ranges of any of these variables.

Run my regression on the truncated sample.

I was wondering whether there are any serious cons of this approach - particularly given that my method will include only a subset of the observations for some firms. Bear in mind that this is meant to provide a rough and ready indication rather than be a super robust exercise.

Many thanks for your help.

**Tags:** econometrics

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## 1 answers

### Answer by username_1 on 2018-05-31. Score: 1

Your approach seems no good. Let us make it really simple: You have only the dependent variable and you want to compare the averages across countries. You keep the firms whose $y$ values are inside the range. By doing this, you are (sort of) equating $y$ values, which you aimed to compare. This is strange. In fact, this leads to endogenous sample-selection.

It seems, however, acceptable to keep only comparable firms (rather than firm-year) based on the exogenous variables.

> **Comments:**
> **username_2**: Fully agree. Apart from a few exceptions (e.g. dropping people with negative incomes), selection on the dependent variable usually leads to heavily biased results.  

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