Econometric Analysis of Panel Data

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Econometric Analysis of Panel Data

• Panel Data Analysis Extension
• Generalized Random Effects Model
• Seemingly Unrelated Regression
• Cross Section Correlation
• Parametric representation
• Spatial dependence defined by cross section
  contiguity or distance

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Panel Data Analysis Extension

• Generalized Random Effects Model

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Panel Data Analysis Extension

• Seemingly Unrelated Regression

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Panel Data Analysis Extension

• Cross Section Correlation
• Unobserved heterogeneity fixed effects or random
  effects
• OLS with robust inference
• GLS allowing time serial correlation

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Panel Data Analysis Extension

• Cross Section Correlation
• Parametric Representation

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Panel Data Analysis Extension

• Spatial Lag Variables
• Spatial Weights

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Panel Data Analysis Extension

• Spatial Lag Model
• OLS is biased and inconsistent
• Unobserved heterogeneity fixed effects or random
  effects
• Observed heterogeneity

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Panel Data Analysis Extension

• Spatial Error Model
• Unobserved heterogeneity
• Fixed effects
• Random effects
• Observed heterogeneity

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Panel Data Analysis Extension

• Spatial Panel Data Analysis
• Model specification could be a mixed structure of
  spatial lag and spatial error model.
• Unobserved heterogeneity could be fixed effects
  or random effects.
• OLS is biased and inconsistent Consistent IV or
  2SLS should be used, with robust inference.
• If normality assumption of the model is
  maintained, efficient ML estimation could be used
  but with computational complexity.
• Efficient GMM estimation is recommended.

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Panel Data Analysis Extension

• Panel Spatial Model Estimation
• IV / 2SLS / GMM
• Instrumental variables for the spatial lag
  variable Wyt Xt, WXt, W2Xt,
• W is a predetermined spatial weights matrix based
  on geographical contiguity or distance

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Panel Data Analysis Extension

• Space-Time Dynamic Model
• Arellano-Bond estimator may be extended to
  include cross section correlation in the
  space-time dynamic models.

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Example U. S. Productivity

• The Model (Munnell 1988)
• One-way panel data model
• 48 U.S. lower states
• 17 years from 1970 to 1986
• Variables gsp (gross state output) cap (private
  capital) 3 components of public capital (hwy,
  water, util) emp (labor employment) unemp
  (unemployment rate)

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Example U. S. Productivity

• Spatial Panel Data Model
• Cross Section Correlation
• Cross section dependence is defined by state
  contiguity if state i is adjacent with state j,
  then wij1 otherwise wij0. The spatial weights
  matrix W is then row-standardized with diagonal
  0.
• Pooled, fixed effects, random effects models are
  all biased and inconsistent. IV or 2SLS methods
  should be used with proper instruments.

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Example U. S. Productivity

• Spatial Panel Data Model
• Space-Time Dynamics