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Econometric Analysis of Panel Data

Econometric Analysis of Panel Data

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Econometric Analysis of Panel Data

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Presentation Transcript

  1. Econometric Analysis of Panel Data • Dynamic Panel Data Analysis • First Difference Model • Instrumental Variables Method • Generalized Method of Moments • Arellano-Bond-Bover Estimator

  2. Dynamic Panel Data Analysis • The Model

  3. Dynamic Panel Data Analysis • The Model

  4. Dynamic Panel Data Analysis • Model Assumptions: First-Difference Model

  5. Dynamic Panel Data Analysis • Instrumental Variables

  6. Dynamic Panel Data Analysis • Instrumental Variables

  7. Dynamic Panel Data Analysis • Instrumental Variables Method

  8. Dynamic Panel Data Model Instrumental Variables Estimation HAC Variance-Covariance Matrix

  9. Dynamic Panel Data Model • Arellano-Bond Estimator is based on Generalized Method of Moments (GMM) • With a proper choice of a p.d.f. weighting matrix γ

  10. Arellano-Bond Estimator

  11. Arellano-Bond Estimator Notations

  12. Arellano-Bond Estimator First-step GMM Estimator

  13. Arellano-Bond Estimator Second-step GMM Estimator

  14. Example: Returns to Schooling Cornwell and Rupert Model (1988) Data (575 individuals over 7 years) Dependent Variable yit: LWAGE = log of wage Explanatory Variables xit: Time-Variant Variables x1it: EXP = work experience WKS = weeks worked  endogenousOCC = occupation, 1 if blue collar, IND = 1 if manufacturing industrySOUTH = 1 if resides in southSMSA = 1 if resides in a city (SMSA)MS = 1 if married UNION = 1 if wage set by union contract Time-Invariant Variables x2i: ED = years of education  endogenousFEM = 1 if femaleBLK = 1 if individual is black