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What Are the Benefits of High-Frequency Data for Fixed Effects Panel Models?

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  • Dalia Ghanem
  • Aaron Smith

Abstract

High-frequency panel data sets, where outcomes and regressors are observed at a daily or hourly frequency, are increasingly available in environmental and resource economics. To understand the potential gains from these richer data sets, this paper compares fixed effects estimators using high-frequency data with those using temporally aggregated data. We provide a set of conditions under which both estimators are consistent for the same parameter. Three departures from these conditions are (1) response heterogeneity at the high-frequency dimension, (2) differential response to high- and low-frequency variation in the regressor, and (3) nonlinearities in the relationship between the high-frequency outcome and regressor. Under these alternative conditions, the two estimators converge to different probability limits. In general, we recommend that empirical researchers think carefully about the features of the “true” high-frequency outcome equation to understand the effects of high-frequency data and temporal aggregation. We illustrate our results using an application to the energy-temperature relationship.

Suggested Citation

  • Dalia Ghanem & Aaron Smith, 2021. "What Are the Benefits of High-Frequency Data for Fixed Effects Panel Models?," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 8(2), pages 199-234.
    • Handle: RePEc:ucp:jaerec:doi:10.1086/710968
    DOI: 10.1086/710968
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    Cited by:

    1. Lee, Wang-Sheng & Tran, Trang My & Yu, Lamont Bo, 2023. "Green infrastructure and air pollution: Evidence from highways connecting two megacities in China," Journal of Environmental Economics and Management, Elsevier, vol. 122(C).
    2. Liang, Jing & Qiu, Yueming (Lucy) & Xing, Bo, 2022. "Impacts of the co-adoption of electric vehicles and solar panel systems: Empirical evidence of changes in electricity demand and consumer behaviors from household smart meter data," Energy Economics, Elsevier, vol. 112(C).
    3. Bossman, Ahmed & Gubareva, Mariya & Teplova, Tamara, 2023. "Asymmetric effects of market uncertainties on agricultural commodities," Energy Economics, Elsevier, vol. 127(PB).
    4. Lee, Wang-Sheng & Tran, Trang My, 2024. "Emissions from Military Training: Evidence from Australia," IZA Discussion Papers 16889, Institute of Labor Economics (IZA).

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