Econometric Analysis of Panel Data

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
• 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
• 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
• 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, 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

• yit Real per capita GDP
• si Average saving rate (over 1960-1985)
• ni Average population growth rate (over
  1960-1985)
• gd 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. 149-155.  See Baltagi,
  page 122 for further analysis.  

9
Example Returns to Schooling

• LWAGE log of wage dependent variable in
  regressions
• EXP work experienceWKS weeks workedOCC
  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 marriedFEM 1 if femaleUNION 1 if wage
  set by union contractED years of
  educationBLK 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

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Example Wage Equation

• Part 2 Time-Invariant Data (2178 individuals)
• ability Time invariant ability
• medu Mothers education
• fedu Fathers education
• d Dummy variable for residence in a broken home
• siblings Number of siblings.

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Example U. S. Productivity

• Munnell 1988 Productivity Data48 Continental
  U.S. States, 17 Years1970-1986
• STATE State name,
• ST ABBState 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,