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Practical notes on panel data models with interactive effects

Author

Listed:
  • Bai, Jushan
  • Li, Kunpeng

Abstract

This note is intended for researchers who want to use the interactive effects model for empirical modeling. We consider how to estimate interactive effects models when some of the factors and factor loading are observable. Observable factors are common regressors which do not vary across individuals such as macroeconomic variables, but their regression coefficients are individual-dependent. Observable factor loadings correspond to time-invariant regressors such that race, gender and education, but their regression coefficients are time dependent. This note elaborates the estimation procedures in Bai (2009) in the presence of such regressors.

Suggested Citation

  • Bai, Jushan & Li, Kunpeng, 2017. "Practical notes on panel data models with interactive effects," MPRA Paper 81087, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:81087
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    More about this item

    Keywords

    observable factors; observable factor loadings; common regressors; time-invariant regressors;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis

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