Panel Data

# Panel Data - ECON3300/7360 PANEL DATA Reading Chapter title...

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ECON3300/7360 PANEL DATA Reading : Chapter title of Panel data Regression Models in Gujarati. Panel Data (Pooled Data) - combination of cross-section and time series data E.g. Gross Investment, Stock Price, Capital Stock Firm 1: 1960-99 Firm 2: 1960-99 Firm 3: 1960-99 Benefits of Pooling 1. Controls for individual heterogeneity. 2. More informative data. 3. Less collinearity, more degrees of freedom. 4. Suited to study the dynamics of change. 5. Better detect and measure effects. 6. Enable study of more complicated behavioural models. 7. Minimises bias from aggregate level data. Limitations 1. Design and data collection problems. 2. Distortions of measurement errors. 3. Self-selection and truncated sample, non-response, attrition. 1

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4. Short time-series dimension. Pooling or Combining all 120 observations, Gross Investment it = β 1 + β 2 Stock Price it + β 3 Capital Stock it where i = 1, 2, 3 (number of firms) t = 1960, … 1999 (time period) Estimation of Panel Data Models Fixed Effects Approach Random Effects Approach 2
Table 16.1 Investment Data for Four Companies, 1935-1954 Observation I F -1 C -1 Observation I F -1 C -1 GE US Notes: Y = I = gross investment = additions to plant and equipment plus maintenance and repairs, in millions of dollars deflated by P 1 X 2 = F = value of the firm – price of common and preferred shares at Dec.31 (or average price of Dec.31 and Jan.31 of the following year) times number of common and preferred shares outstanding plus total book value of debt at Dec.31, in millions of dollars deflated by

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Panel Data - ECON3300/7360 PANEL DATA Reading Chapter title...

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