PanelDataNotes-10

PanelDataNotes-10 - 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 10. Dynamic Models, Heterogeneity and Nonstationary Panel Data Cross Country Growth Convergence 1 i,t i,t i,t i,t i,t i,t i,t-1 i,t-1 i,t 1 i i,t 1 i,t i i,t 1 Y K (A L ) A index of technology K capital stock = I + (1- )K I s Y Investment Savings L labor (1 n )L ---- = = = = = = = = + Solow - Swan Growth Model Equilibrium Model for Steady i,t i i i i,t 1 i,t i i i i i i logY t log Y (1- )g , g=technological growth rate "convergence" parameter; 1- = rate of convergence to steady state Cross country comparisons of convergence rat- = + + + = = State I ncome es are the focus of study. Heterogeneous Dynamic Model i,t i i i,t 1 i it i,t i i i logY logY x Long run effect of interest is 1 Average (over countries) effect: or 1 (1) "Fixed Effects:" Separate regressions, then average results. (2) Country means (o- = + + + =- - ver time) - can be manipulated to produce consistent estimators of desired parameters (3) Time series of means across countries (does not work at all) (4) Pooled - no way to obtain consistent est i i i imates. (5) Mixed Fixed (Weinhold - Hsiao): Build separate into the equation with "fixed effects," treat u as random. = + Fixed Effects Approach i,t i i i,t 1 i it i,t i i i i i i N N i i 1 i 1 i i N i 1 i N i 1 logY logY x , = 1 1 (1) Separate regressions; , , 1 1 (2) Average estimates = or N N 1 (1/ N) Function of averages: = 1 (1/ N)- = = = = = + + + = - - = = - - i i N i i= 1 In each case, each term i has variance O(1/T) Each average has variance O(1/N)...
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This note was uploaded on 01/05/2012 for the course B 55.9912 taught by Professor Willamgreene during the Fall '11 term at NYU.

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PanelDataNotes-10 - Econometric Analysis of Panel Data...

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