Panel%20Data%20Analysis%20Using%20GAUSS

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Panel Data Analysis Using GAUSS

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• Kuan-Pin LinPortland State University

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Panel Data AnalysisHypothesis Testing

• Panel Data Model Specification
• Pool or Not To Pool
• Random Effects vs. Fixed Effects
• Heterscedasticity
• Time Serial Correlation
• Spatial Correlation

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Fixed Effects vs. Random Effects

• Hypothesis Testing

Estimator Random Effects E(uiXi) 0 Fixed Effects E(uiXi) / 0
GLS or RE-LS (Random Effects) Consistent and Efficient Inconsistent
LSDV or FE-LS (Fixed Effects) Consistent Inefficient Consistent Possibly Efficient
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Random Effects vs. Fixed Effects

• Fixed effects estimator is consistent under H0
  and H1 Random effects estimator is efficient
  under H0, but it is inconsistent under H1.
• Hausman Test Statistic

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Random Effects vs. Fixed Effects

• Alternative Hausman Test(Mundlak Approach)
• Estimate the random effects model with the group
  means of time variant regressors
• F Test that g 0

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Hypothesis Testing

• Fixed Effects Model
• Random Effects Model

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Heteroscedasticity

• The Null Hypothesis
• Based on the auxiliary regression
• LM test statistic is NR2 ?2(K), N is total
  number of observation (i,t)s.

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Cross Sectional Correlation

• The Null Hypothesis
• Based on the estimated correlation coefficients
• Breusch-Pagan LM Test (Breusch, 1980)
• As T ? 8 (N fixed)

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Cross Sectional Correlation

• Bias adjusted Breusch-Pagan LM Test (Pesaran,
  et.al. 2008)

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Time Serial Correlation

• The Model and Null Hypothesis
• LM Test Statistic

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Joint Hypothesis TestingRandom Effects and Time
Serial Correlation

• The Model
• Joint Test for AR(1) and Random Effects

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Joint Hypothesis TestingRandom Effects and Time
Serial Correlation

• Based on OLS residuals

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Joint Hypothesis TestingRandom Effects and Time
Serial Correlation

• Marginal Tests for AR(1) Random Effects
• Robust Test for AR(1) Random Effects
• Joint Test Equivalence

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Panel Data AnalysisExtensions

• Seeming Unrelated Regression
• Allowing Cross-Equation Dependence
• Fixed Coefficients Model
• Dynamic Panel Data Analysis
• Using FD Specification
• IV and GMM Methods
• Spatial Panel Data Analysis
• Using Spatial Weights Matrix
• Spatial Lag and Spatial Error Models

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References

• Baltagi, B., Li, Q. (1995) Testing AR(1) against
  MA(1) disturbances in an error component model.
  Journal of Econometrics, 68, 133-151.
• Baltagi, B., Bresson, G., Pirotte, A. (2006)
  Joint LM test for homoscedasticity in a one-way
  error component model. Journal of Econometrics,
  134, 401-417.
• Bera, A.K., W. Sosa-Escudero and M. Yoon (2001),
  Tests for the error component model in the
  presence of local misspecification, Journal of
  Econometrics 101, 123.
• Breusch, T.S. and A.R. Pagan (1980), The Lagrange
  multiplier test and its applications to model
  specification in econometrics, Review of Economic
  Studies 47, 239253.
• Pesaran, M.H. (2004), General diagnostic tests
  for cross-section dependence in panels, Working
  Paper, Trinity College, Cambridge.
• Pesaran, M.H., Ullah, A. and Yamagata, T. (2008),
  A bias-adjusted LM test of error cross-section
  independence, The Econometrics Journal,11,
  105127.