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Econometrics 2

Econometrics 2. Advanced Panel Data Methods I. Panel Data Methods. Last time: Panel data concepts and the two-period case (13.3-4) Unobserved effects model: Time-invariant and idiosyncratic effects Omitted variables bias (heterogeneity bias) First-difference estimation

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Econometrics 2

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  1. Econometrics 2 Advanced Panel Data Methods I Advanced Panel Data Methods

  2. Panel Data Methods Last time: Panel data concepts and the two-period case (13.3-4) • Unobserved effects model: Time-invariant and idiosyncratic effects • Omitted variables bias (heterogeneity bias) • First-difference estimation • Policy analysis with two-period panel data Today: Panel data with more periods and fixed effects estimation (13.5, 14.1) • First-differencing with more than two periods • Within transformation • Dummy variable regression • A simulated illustration • Example: Job training grants. Advanced Panel Data Methods

  3. Data structure and model Advanced Panel Data Methods

  4. Three approaches to fixed effect estimation Advanced Panel Data Methods

  5. Three approaches to fixed effect estimation (2) Advanced Panel Data Methods

  6. Three approaches to fixed effect estimation (3) Advanced Panel Data Methods

  7. Comparison of fixed effect approaches Advanced Panel Data Methods

  8. Comparison of fixed effect approaches (2) Advanced Panel Data Methods

  9. A simulated illustration: n=5, T=3 Advanced Panel Data Methods

  10. Case 1: a and x are positively correlated: Cross-plots of levels and deviations from time-averages Advanced Panel Data Methods

  11. Case 1: a and x are positively correlated: Analytical graph Advanced Panel Data Methods

  12. Case 2: a and x are negatively correlated Advanced Panel Data Methods

  13. Case 3: a and x are uncorrelated Advanced Panel Data Methods

  14. Job training example with three periods • Example: The effect of a grant to firms for job training. • Aim of program: Enhance the productivity of workers in the firm. • Data for 1987, 1988 and 1989. Effect of grant might extend over time. • Model: • Estimate by Within estimation and FD estimation. Use panel data module of PcGive. Advanced Panel Data Methods

  15. Next time • Monday! • Random effects models • Applying panel data methods to other data structures • Wooldridge sec. 14.2-3. • Exercises this week! Advanced Panel Data Methods

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