Universität zu Köln

Breitung, Jörg ORCID: 0000-0001-7367-0863 and Salish, Nazarii ORCID: 0000-0002-0682-1753 (2021). Estimation of heterogeneous panels with systematic slope variations. Journal of Econometrics, 220 (2). 399 - 416. LAUSANNE: ELSEVIER SCIENCE SA. ISSN 0304-4076

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Abstract

We analyse estimation procedures for the panel data models with heterogeneous slopes. Specifically we take into account a possible dependence between regressors and heterogeneous slope coefficients, which is referred to as systematic variation. It is shown that under relevant forms of systematic slope variations (i) the pooled OLS estimator is severely biased, (ii) Swamy's GLS estimator is inconsistent if the number of time periods T is fixed, whereas (iii) the mean-group estimator always provides consistent estimators at the risk of high variances. Following Mundlak (1978) we propose an augmentated regression which results in a simple and robust version of the pooled estimator. The latter approach avoids the risk of large standard errors of the mean-group estimator, whenever T is small. We also propose two test statistics for systematic slope variation using the Lagrange multiplier and Hausman principles. We derive their asymptotic properties and provide a local power analysis of both test statistics. Monte Carlo experiments corroborate our theoretical findings and show that for all combinations of N and T the Mundlak-type GLS estimator outperform all other estimators. (c) 2020 Elsevier B.V. All rights reserved.

Item Type:	Journal Article
Creators:	Creators Email ORCID ORCID Put Code Breitung, Jörg UNSPECIFIED orcid.org/0000-0001-7367-0863 UNSPECIFIED Salish, Nazarii UNSPECIFIED orcid.org/0000-0002-0682-1753 UNSPECIFIED
URN:	urn:nbn:de:hbz:38-574755
DOI:	10.1016/j.jeconom.2020.04.007
Journal or Publication Title:	Journal of Econometrics
Volume:	220
Number:	2
Page Range:	399 - 416
Date:	2021
Publisher:	ELSEVIER SCIENCE SA
Place of Publication:	LAUSANNE
ISSN:	0304-4076
Language:	English
Faculty:	Faculty of Management, Economy and Social Sciences
Divisions:	Faculty of Management, Economics and Social Sciences > Economics > Econometrics and Statistics > Professorship for Statistics and Econometrics
Subjects:	no entry
Uncontrolled Keywords:	Keywords Language CORRELATED RANDOM-COEFFICIENT; HOMOGENEITY; INFERENCE Multiple languages Economics; Mathematics, Interdisciplinary Applications; Social Sciences, Mathematical Methods Multiple languages
Refereed:	Yes
URI:	http://kups.ub.uni-koeln.de/id/eprint/57475