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Econometric Analysis of Panel Data

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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)

2 Introduction Panel Data Panel Data Analysis
Definition (Wikipedia Encyclopedia) Examples of Panel Datasets Panel Study of Income Dynamics (PSID) Penn World Table (PWT) Panel Data Analysis A Primer for Panel Data Analysis (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 Advanced Topics xthausman xttest0
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: Iit = Gross investment Fit = Market value Cit = 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, ," Quarterly Journal of Economics 106, 1991, G. Mankiw, D. Romer, and D. Weil, "A Contribution to the Empirics of Economic Growth,“ Quarterly Journal of Economics 107, 1992,

7 Example: International Comparison of Economic Growth
yit = Real per capita GDP si = Average saving rate (over ) ni = Average population growth rate (over ) g+d = 5% COMi = 1 if communist, 0 otherwise OPECi =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  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: 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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