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Inference on time-invariant variables using panel data: a pretest estimator

Author

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  • Jean-Bernard Chatelain

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Kirsten Ralf

    (INSEEC - Institut des hautes études économiques et commerciales | School of Business and Economics, ESCEM Tours Poitiers - ESCEM School of Business and Management - Groupe école supérieure de commerce et de management Tours-Poitiers)

Abstract

For panel data models including time-invariant variables, this paper proposes a new Hausman pretest estimator of the internal instruments of Hausman-Taylor estimator. It assumes Mundlak and Krishnakumar linear specification for the endogeneity of random individual effects. Furthermore, the paper evaluates the biases of currently used estimators: repeated between, ordinary least squares, two-stage restricted between, Oaxaca-Geisler estimator, fixed effect vector decomposition, and generalized least squares. Some of these may lead to erroneous conclusions regarding the statistical significance of the estimated parameter values of time-invariant variables, especially when time-invariant variables are correlated with the individual effects.

Suggested Citation

  • Jean-Bernard Chatelain & Kirsten Ralf, 2020. "Inference on time-invariant variables using panel data: a pretest estimator," Working Papers halshs-03059883, HAL.
    • Handle: RePEc:hal:wpaper:halshs-03059883
    DOI: 10.2139/ssrn.3165633
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Time-Invariant Variables; Panel Data; Time-Series Cross-Sections; Hausman Pretest Estimator; Mundlak Estimator; Hausman-Taylor Estimator;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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