Ch10Panel [Compatibility Mode]

Ch10Panel [Compatibility Mode] - Regression with Panel Data...

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1 Regression with Panel Data (SW Chapter 10) A panel dataset contains observations on multiple entities ndividuals) where each entity is observed at two or more (individuals), where each entity is observed at two or more points in time. Hypothetical examples : Data on 420 California school districts in 1999 and again in 2000, for 840 observations total. 1 Data on 50 U.S. states, each state is observed in 3 years, for a total of 150 observations. Data on 1000 individuals, in four different months, for 4000 observations total. Panel Data Examples Data on sales and prices for 100 retail stores over 24 onths months Data on 5 million electric customer bills over 60 months. Data on 1000 individuals recording all of their purchases at grocery and drug stores over a year. These are usually collected as daily or weekly totals for each unique SKU 2 the consumer purchased. Notation for panel data A double subscript distinguishes entities (states) and time eriods (years) periods (years) i = entity (state), n = number of entities, so i = 1,…, n t = time period (year), T = number of time periods 1 3 so t =1,…, T Data: Suppose we have 1 regressor. The data are: ( X it , Y it ), i = 1,…, n , t = 1,…, T Panel data notation, ctd. Panel data with k regressors: ( X 1 it , X 2 it ,…, X kit , Y it ), i = 1,…, n , t = 1,…, T n = number of entities (states) T = number of time periods (years) 4 Some jargon… Another term for panel data is longitudinal data balanced panel : no missing observations (all variables are observed for all entites [states] and all time periods [years])
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2 Why are panel data useful? With panel data we can control for factors that: ary across entities (states) but do not vary over time Vary across entities (states) but do not vary over time Could cause omitted variable bias if they are omitted are unobserved or unmeasured – and therefore cannot be included in the regression using multiple regression 5 Here’s the key idea: If an omitted variable does not change over time, then any changes in Y over time cannot be caused by the omitted variable. Example of a panel data set: Traffic deaths and alcohol taxes Observational unit: a year in a U.S. state 8 U S states so of entities = 48 48 U.S. states, so n = of entities = 48 7 years (1982,…, 1988), so T = # of time periods = 7 Balanced panel, so total # observations = 7 ´ 48 = 336 Variables: Traffic fatality rate (# traffic deaths in that state in that year, 6 y( y , per 10,000 state residents) Tax on a case of beer Other (legal driving age, drunk driving laws, etc.) U.S. traffic death data for 1982: 7 Higher alcohol taxes, more traffic deaths? Why is the key determinant of the slope in the previous regression? A. States with high residuals B. States with low residuals C. States with high beer taxes D. States with low beer taxes 8
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3 U.S. traffic death data for 1988 9 Higher alcohol taxes, more traffic deaths?
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This note was uploaded on 11/28/2010 for the course ECON Economics taught by Professor Davidbrownstone during the Spring '10 term at UC Irvine.

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Ch10Panel [Compatibility Mode] - Regression with Panel Data...

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