This preview shows pages 1–8. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentThis preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentThis preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentThis preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
Unformatted text preview: Estimation of Production Functions: Fixed Effects in Panel Data Lecture VIII 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 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 . 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 firstdifferencing 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 ′ = + + , 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 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 = + + 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 = = = ′ = + = = = ∑ ∑ ∑...
View
Full
Document
This note was uploaded on 07/15/2011 for the course AEB 6184 taught by Professor Staff during the Fall '09 term at University of Florida.
 Fall '09
 Staff

Click to edit the document details