Description

Arbitrary Regressors. Pooled (Constant Effects) ModelOther established presumptions remained.OLS is one-sided; Instrumental variables estimation ought to be used.IV estimator is reliable.. Consistent Effects Model. Instrumental Variables Estimation. Consistent Effects Model. Instrumental Variables EstimationInstrumental Variables: ZiIncluded Instruments: X1i

Transcripts

Econometric Analysis of Panel Data Random Regressors Pooled (Constant Effects) Model Instrumental Variables Fixed Effects Model Random Effects Model Hausman-Taylor Estimator

Random Regressors Pooled (Constant Effects) Model Other established suppositions remained. OLS is one-sided; Instrumental factors estimation ought to be utilized. IV estimator is reliable.

Constant Effects Model Instrumental Variables Estimation

Constant Effects Model Instrumental Variables Estimation Instrumental Variables: Z i Included Instruments: X1 i # Z i ≥ # W i

Constant Effects Model Instrumental Variables Estimation

Constant Effects Model Instrumental Variables Estimation HAC Variance-Covariance Matrix

Constant Effects Model Hypothesis Testing of Instrumental Variables Test for Endogeneity Test for Overidentification Test for Weak Instruments

Random Regressors Fixed Effects Model Other traditional suspicions remained. Can not evaluate the parameters of time-invariant regressors, regardless of the possibility that they are associated with model blunder. The arbitrary regressors x2 must be time-shifting.

Fixed Effects Model The Model Instrumental Variables #Z i ≥ #X i ( Z i should be time variation)

Fixed Effects Model Within Estimator Panel-Robust Variance-Covariance Matrix

Example: Returns to Schooling Cornwell and Rupert Model (1988) Data (575 people more than 7 ears) Dependent Variable y it : LWAGE = log of wage Explanatory Variables x it : Time-Variant Variables x1 it : EXP = work understanding (+EXP 2 ) exogenous WKS = weeks worked endogenous OCC = occupation, 1 if hands on IV IND = 1 if fabricating industry IV SOUTH = 1 if dwells in south IV SMSA = 1 if lives in a city (SMSA) IV MS = 1 if wedded IV UNION = 1 if wage set by union contract IV Time-Invariant Variables x2 i : ED = years of training endogenous FEM = 1 if female BLK = 1 if individual is dark

Random Regressors Random Effects Model Other traditional presumptions remained. Mundlak approach might be utilized when Instrumental factors must be utilized if

Random Effects Model The Model

Random Effects Model (Partial) Within Estimator Panel-Robust Variance-Covariance Matrix

Example: Returns to Schooling Cornwell and Rupert Model (1988) Data (575 people more than 7 years) Dependent Variable y it : LWAGE = log of wage Explanatory Variables x it : Time-Variant Variables x1 it : EXP = work understanding (+EXP 2 ) exogenous WKS = weeks worked endogenous OCC = occupation, 1 if industrial IV IND = 1 if producing industry IV SOUTH = 1 if dwells in south IV SMSA = 1 if lives in a city (SMSA) IV MS = 1 if wedded IV UNION = 1 if wage set by union contract IV Time-Invariant Variables x2 i : ED = years of instruction endogenous FEM = 1 if female IV BLK = 1 if individual is dark IV

Hausman-Taylor Estimator The Model Time-variation Variables: x1 it , x2 it Time-invariant Variables:x3 i , x4 i Fixed impacts model can not gauge b 3 and b 4; Random impacts display has irregular regressors: x2 and x4 related with u.

Hausman-Taylor Estimator Fixed Effects Model

Hausman-Taylor Estimator Fixed Effects Model Within Residuals

Hausman-Taylor Estimator Random Effects Model

Hausman-Taylor Estimator Instrumental Variables Hausman-Taylor (1981) Amemiya-Macurdy (1986)

Hausman-Taylor Estimator Instrumental Variable Estimation

Example: Returns to Schooling Cornwell and Rupert Model (1988) Data (575 people more than 7 ears) Dependent Variable y it : LWAGE = log of wage Explanatory Variables x it : Time-Variant Variables x1 it : EXP = work encounter endogenous (+EXP 2 ) WKS = weeks worked endogenous OCC = occupation, 1 if hands on, IND = 1 if fabricating industry SOUTH = 1 if dwells in south SMSA = 1 if lives in a city (SMSA) MS = 1 if wedded endogenous UNION = 1 if wage set by union contract endogenous Time-Invariant Variables x2 i : ED = years of instruction endogenous FEM = 1 if female BLK = 1 if individual is dark