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Joining Panel Data with Cross-Sections for Efficiency Gains: An Application to a Consumption Equation for Nicaragua

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  • Bruno, Randolph Luca

    (University College London)

  • Stampini, Marco

    (Inter-American Development Bank)

Abstract

This paper explores how cross-sectional data can be exploited jointly with longitudinal data, in order to increase estimation efficiency while properly tackling the potential bias due to unobserved individual characteristics. We propose an innovative procedure and we show its implementation by analysing the determinants of consumption in Nicaragua, based on data from three Living Standard Measurement Study surveys from 1993, 1998 and 2001. The last two rounds constitute an unbalanced longitudinal data set, while the first is a cross-section of different households. Under the assumption that the relationship between observed and unobserved characteristics is homogeneous across time, information from longitudinal data is used to clean the bias in the unpaired sample. In a second step, corrected unpaired observations are used jointly with panel data. This reduces the standard errors of the estimation coefficients and might increase their significance as well, otherwise compromised by the limited variation provided by the short longitudinal data.

Suggested Citation

  • Bruno, Randolph Luca & Stampini, Marco, 2007. "Joining Panel Data with Cross-Sections for Efficiency Gains: An Application to a Consumption Equation for Nicaragua," IZA Discussion Papers 3231, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp3231
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    References listed on IDEAS

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    1. Nijman, T.E., 1990. "Estimation of time dependent parameters in linear models using cross sections, panels or both," Other publications TiSEM 3efbf7de-1ca7-4f9f-b515-3, Tilburg University, School of Economics and Management.
    2. Pitt, Mark M & Rosenzweig, Mark R & Gibbons, Donna M, 1993. "The Determinants and Consequences of the Placement of Government Programs in Indonesia," The World Bank Economic Review, World Bank, vol. 7(3), pages 319-348, September.
    3. Davis, Benjamin & Stampini, Marco, 2002. "Pathways towards prosperity in rural Nicaragua: or why households drop in and out of poverty, and some policy suggestions on how to keep them out," ESA Working Papers 289102, Food and Agriculture Organization of the United Nations, Agricultural Development Economics Division (ESA).
    4. Deaton, Angus, 1985. "Panel data from time series of cross-sections," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 109-126.
    5. Berhman, J.R., 1990. "The action of human resources and poverty on one another: what we have yet to learn," Papers 74, World Bank - Living Standards Measurement.
    6. Nijman, T.E. & Verbeek, M.J.C.M., 1990. "Estimation of time-dependent parameters in linear models using cross-sections, panels, or both," Other publications TiSEM 1b042f06-e9e2-4712-8460-c, Tilburg University, School of Economics and Management.
    7. Stampini, Marco & Davis, Benjamin, 2003. "Discerning transient from chronic poverty in Nicaragua: measurement with a two period panel data set," ESA Working Papers 289096, Food and Agriculture Organization of the United Nations, Agricultural Development Economics Division (ESA).
    8. Nijman, Theo & Verbeek, Marno, 1990. "Estimation of time-dependent parameters in linear models using cross-sections, panels, or both," Journal of Econometrics, Elsevier, vol. 46(3), pages 333-346, December.
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    More about this item

    Keywords

    consumption model; estimation efficiency; pseudo-panel; panel data; Nicaragua;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C42 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Survey Methods
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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