PanelDataNotes-4

PanelDataNotes-4 - Econometric Analysis of Panel Data...

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Unformatted text preview: Econometric Analysis of Panel Data William Greene Department of Economics Stern School of Business Econometric Analysis of Panel Data 4. Fixed Effects Estimation with Fixed Effects The fixed effects model c i is arbitrarily correlated with x it but E[ it | X i ,c i ]=0 Dummy variable representation it it i it i i i i i i i i i i i i N i= 1 i 1 2 N y = + c + , observation for person i at time t = + c + , T observations in group i = + + , note (c ,c ,...,c ) = + + , T observations in the sample c= ( , ,... ) , = x y X i X c c y X c c c c N i= 1 i T by 1 vector N it it j= 1 j ijt it ijt y = + d + , d = (i=j) x 1 Assumptions for the FE Model y i = X i + d i i + i , for each individual 1 1 2 2 N = = N = + + + 1 2 N y X d y X d y X d [X,D] Z M M M M O M E[c i | X i ] = g( X i ); Effects are correlated with included variables. Common: Cov[ x it ,c i ] Useful Analysis of Variance Notation i i 2 T T N 2 N 2 N i=1 t=1 it i=1 t=1 it i i=1 i i Decomposition of Total variation: (z z) (z z.) T z. z - =- +- Total variation = Within groups variation + Between groups variation Baltagi and Griffins Gasoline Data World Gasoline Demand Data, 18 OECD Countries, 19 years Variables in the file are COUNTRY = name of country YEAR = year, 1960-1978 LGASPCAR = log of consumption per car LINCOMEP = log of per capita income LRPMG = log of real price of gasoline LCARPCAP = log of per capita number of cars See Baltagi (2001, p. 24) for analysis of these data. The article on which the analysis is based is Baltagi, B. and Griffin, J., "Gasoline Demand in the OECD: An Application of Pooling and Testing Procedures," European Economic Review, 22, 1983, pp. 117-137. The data were downloaded from the website for Baltagi's text. Analysis of Variance Per Capita G asoline U se for 18 O EC D C ountries COUNTRY 3.50 4.00 4.50 5.00 5.50 6.00 6.50 3.00 2 4 6 8 10 12 14 16 18 LGASPCAR Analysis of Variance REGRESS;Lhs=lgaspcar ; Rhs=one ; Panel ; Str = Country $ +-------------------------------------------------------------------------- + | Analysis of Variance for LGASPCAR | | Stratification Variable COUNTRY | | Observations weighted by ONE | | Total Sample Size 342 | | Number of Groups 18 | | Number of groups with no data 0 | | Overall Sample Mean 4.2962420 | | Sample Standard Deviation .5489071 | | Total Sample Variance .3012990 | | | | Source of Variation...
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PanelDataNotes-4 - Econometric Analysis of Panel Data...

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