EERC Methodological Seminars Series

ECONOMETRIC SEQUENCE

Panel Data Analysis

Instructor: Stanislav Anatolyev, New Economic School, Moscow

This seminar is the third part of the econometric sequence. The seminar focused on panel data techniques, a methodology that makes an analysis of a large number of objects through short periods in time. It can be particularly relevant for studying dynamic changes in household behavior, enterprise productivity, investment, regional growth, etc. Studying these methods requires good knowledge of linear and matrix algebra. Beside a chapter in Greene’s book, several applied papers will be assigned as readings.

ORGANIZATION

Along with lectures, there will be separate computer sessions. The statistical working tool is Econometric Views. The students are encouraged to work in groups. The instructor will be available during office hours.

LITERATURE

· Greene, William (2000) Econometric Analysis, 4^th edition, chapter 14

· Balestra, Pietro (1996) Fixed Effects Models and Fixed Coefficients Models. Chapter 3 in: The Econometrics of Panel Data, edited by L. Matyas and P. Sevestre, Kluwer Academic Publishers.

· Matyas, Laszlo (1996) Error Components Models. Chapter 4 in: The Econometrics of Panel Data, edited by L. Matyas and P. Sevestre, Kluwer Academic Publishers.

· Owusu-Gyapong, Anthony (1986) Alternative Estimating Techniques for Panel Data on Strike Activity. Review of Economics and Statistics 68, 526-531.

· Lichtenberg, Frank (1988) Estimation of the Internal Adjustment Costs Model Using Longitudinal Establishment Data. Review of Economics and Statistics 70, 421-430.

· Sevestre, Patrick and Alain Trognon (1996) Dynamic Linear Models. Chapter 7 in: The Econometrics of Panel Data, edited by L. Matyas and P. Sevestre, Kluwer Academic Publishers.

· Holtz-Eakin, Douglas, Whitney Newey, and Harvey Rosen (1989) The Revenues–Expenditures Nexus: Evidence from Local Government Data. International Economic Review 30, 415–430.

· Hsiao, Cheng (1996) Logit and Probit Models. Chapter 16 in: The Econometrics of Panel Data, edited by L. Matyas and P. Sevestre, Kluwer Academic Publishers.

SYLLABUS

I. Introduction to Panel Data

· Classical linear regression: review

· Structure of panel data: cross-sectional dimension and time-series dimension

· Balanced and unbalanced panels, panels and pseudo-panels

· Error component models: one-way and two-way

· Fixed or random effects?

II. One-way Error Component Panel Regression

· The fixed effects model: Least Squares Dummy Variables (LSDV) estimation

· Testing for fixed effects

· The random effects model: Generalized Least Squares (GLS) estimation

· The Between and Within estimators

III. Two-way Error Component Panel Regression

· The fixed effects model: Least Squares Dummy Variables (LSDV) estimation

· Testing for fixed effects

· The random effects model: Generalized Least Squares (GLS) estimation

IV. Testing Hypotheses with Panel Data

· Tests for poolability

· Tests for individual and time effects

· The Hausman specification test

V. Dynamic Panel Regression

· Serial correlation in error component models

· Dynamic fixed effects model: bias of LSDV estimator

· Dynamic random effects model: instrumental variables estimation

VI. Vector Autoregressions and Panel Data

· Vector Autoregressions: review

· Panel stationary VAR with individual effects

· Panel stationary VAR with individual effects and shocks to a common factor

· Panel nonstationary VAR with individual effects

VII. Binary Dependent Variable and Panel Data

· Binary dependent variable models: review

· Fixed effects logit: conditional maximum likelihood estimation

· Fixed effects logit: semiparametric estimation

· Random effects probit