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The two-way Hausman and Taylor estimator

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  • Baltagi, Badi H.

Abstract

This paper reconsiders the two-way Hausman and Taylor (1981) estimator suggested by Wyhowski (1994). The two-way HT estimator allows some but not necessarily all the regressors to be correlated with the individual and time effects. It also allows the estimation of the effects of time-invariant as well as individual-invariant regressors which are wiped out by the two-way fixed effects estimator. Hausman type tests are proposed for this two-way HT regression to test the over-identification conditions implied by the choice of the uncorrelated regressors. This should prove useful for empirical work in this area.

Suggested Citation

  • Baltagi, Badi H., 2023. "The two-way Hausman and Taylor estimator," Economics Letters, Elsevier, vol. 228(C).
    • Handle: RePEc:eee:ecolet:v:228:y:2023:i:c:s0165176523001842
    DOI: 10.1016/j.econlet.2023.111159
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    References listed on IDEAS

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    1. Baltagi, Badi H. & Liu, Long, 2012. "The Hausman–Taylor panel data model with serial correlation," Statistics & Probability Letters, Elsevier, vol. 82(7), pages 1401-1406.
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    More about this item

    Keywords

    Two-way error components model; Panel data; Fixed and random effects; Hausman test; Hausman and Taylor estimator.;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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