{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Lecture 08-2005 - Estimation of Production Functions Fixed...

Info icon This preview shows pages 1–9. Sign up to view the full content.

View Full Document Right Arrow Icon
Estimation of Production Functions: Fixed Effects in Panel Data Lecture VIII
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Analysis of Covariance Looking at a representative regression model It is well known that ordinary least squares (OLS) regressions of y on x and z are best linear unbiased estimators (BLUE) of α, β, and γ * 1, 1, it it it it y x z u i N t T α β γ = + + + = = K K
Image of page 2
However, the results are corrupted if we do not observe z . Specifically if the covariance of x and z are correlated, then OLS estimates of the β are biased. However, if repeated observations of a group of individuals are available (i.e., panel or longitudinal data) they may us to get rid of the effect of z .
Image of page 3

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
For example if z it = z i (or the unobserved variable is the same for each individual across time), the effect of the unobserved variables can be removed by first-differencing the dependent and independent variables ( 29 ( 29 ( 29 , 1 , 1 , 1 , 1 it i t it i t it i t it i t y y x x z z u u β γ - - - - - = - + - + -
Image of page 4
, 1 it i t i z z z - = = ( 29 ( 29 , 1 , 1 , 1 1, 2, it i t it i t it i t y y x x u u i N t T β - - - - = - + - = = L L
Image of page 5

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Similarly if z it = z t (or the unobserved variables are the same for every individual at a any point in time) we can derive a consistent estimator by subtracting the mean of the dependent and independent variables for each individual ( 29 ( 29 ( 29 it i it i it i it i y y x x z z u u β γ - = - + - + -
Image of page 6
it i z z = ( 29 ( 29 1 1 1 1 1 1 it i it i it i T i it t T i it t T i it t y y x x u u y y T x x T u u T β = = = - = - + - = = =
Image of page 7

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 8
Image of page 9
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern