Panel data models with multiple time-varying individual effects

Seung Ahn, Young H. Lee, Peter Schmidt

Research output: Contribution to journalArticle

65 Scopus citations

Abstract

This paper considers a panel data model with time-varying individual effects. The data are assumed to contain a large number of cross-sectional units repeatedly observed over a fixed number of time periods. The model has a feature of the fixed-effects model in that the effects are assumed to be correlated with the regressors. The unobservable individual effects are assumed to have a factor structure. For consistent estimation of the model, it is important to estimate the true number of individual effects. We propose a generalized methods of moments procedure by which both the number of individual effects and the regression coefficients can be consistently estimated. Some important identification issues are also discussed. Our simulation results indicate that the proposed methods produce reliable estimates.

Original languageEnglish (US)
Pages (from-to)1-14
Number of pages14
JournalJournal of Econometrics
Volume174
Issue number1
DOIs
StatePublished - May 2013

Keywords

  • Factor models
  • Panel data
  • Time-varying individual effects

ASJC Scopus subject areas

  • Economics and Econometrics

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