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Econometric Analysis of Panel Data Introduction – Panel Data Definition Unbalanced Panel Balanced Panel: Short Panel: Long Panel: – Panel Data Analysis.

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Presentation on theme: "Econometric Analysis of Panel Data Introduction – Panel Data Definition Unbalanced Panel Balanced Panel: Short Panel: Long Panel: – Panel Data Analysis."— Presentation transcript:

1 Econometric Analysis of Panel Data Introduction – Panel Data Definition Unbalanced Panel Balanced Panel: Short Panel: Long Panel: – Panel Data Analysis Unobserved Heterogeneity Cross Section and Time Series Correlation Using Stata (stata_intro)stata_intro

2 Introduction Panel Data – Definition (Wikipedia Encyclopedia)Wikipedia Encyclopedia – Examples of Panel Datasets Panel Study of Income Dynamics (PSID)PSID Penn World Table (PWT)PWT Panel Data Analysis – A Primer for Panel Data Analysis (Yaffee)Yaffee

3 Using Stata Declare Panel Data and Variables – xtset (or tsset) – xttab Panel Data Analysis: xt commands – xtdes – xtsum – xtdata – xtline Panel Data Regression – xtreg

4 Using Stata Hypothesis Testing – xthausman – xttest0 Advanced Topics – xtregar – xthtaylor (Hausman-Taylor Estimator) – xtivreg (Instrumental Variables Estimation) – xtabond (Arellano-Bond Estimator)

5 Example: Investment Demand Grunfeld and Griliches [1960] – i = 10 firms: GM, CH, GE, WE, US, AF, DM, GY, UN, IBM; t = 20 years: 1935-1954 – I it = Gross investment – F it = Market value – C it = Value of the stock of plant and equipment

6 Example: International Comparison of Economic Growth R. Summers and A. Heston, "The Penn World Table (Mark 5): An Expanded Set of International Comparisons, 1950-1988," Quarterly Journal of Economics 106, 1991, 327-368. G. Mankiw, D. Romer, and D. Weil, "A Contribution to the Empirics of Economic Growth,“ Quarterly Journal of Economics 107, 1992, 407-437.

7 Example: International Comparison of Economic Growth y it = Real per capita GDP s i = Average saving rate (over 1960-1985) n i = Average population growth rate (over 1960-1985) g+  = 5% COM i = 1 if communist, 0 otherwise OPEC i =1 if OPEC, 0 otherwise

8 Example: Returns to Schooling Cornwell and Rupert Data, 595 Individuals, 7 Years These data were analyzed in Cornwell, C. and Rupert, P., "Efficient Estimation with Panel Data: An Empirical Comparison of Instrumental Variable Estimators," Journal of Applied Econometrics, 3, 1988, pp. 149-155. See Baltagi, page 122 for further analysis.

9 Example: Returns to Schooling LWAGE = log of wage = dependent variable in regressions EXP = work experience WKS = weeks worked OCC = occupation, 1 if blue collar, IND = 1 if manufacturing industry SOUTH = 1 if resides in south SMSA = 1 if resides in a city (SMSA) MS = 1 if married FEM = 1 if female UNION = 1 if wage set by union contract ED = years of education BLK = 1 if individual is black

10 Example: Wage Equation Koop and Tobias [2004] The data is available in two parts: – Part 1: Time-Variant Data (17,919 obs.) id= Person id (ranging from 1 to 2178) ed = Education lwage = Log of hourly wage pexp = Potential experience trend = Time trend

11 Example: Wage Equation – Part 2: Time-Invariant Data (2178 individuals) ability = Time invariant ability medu = Mother’s education fedu= Father’s education d = Dummy variable for residence in a broken home siblings = Number of siblings.

12 Example: U. S. Productivity Munnell [1988] Productivity Data 48 Continental U.S. States, 17 Years:1970-1986 – STATE = State name, – ST ABB=State abbreviation, – YR =Year, 1970,...,1986, – PCAP =Public capital, – HWY =Highway capital, – WATER =Water utility capital, – UTIL =Utility capital, – PC =Private capital, – GSP =Gross state product, – EMP =Employment,


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