Showing papers on "Panel data published in 2003"

Panel data econometrics

Abstract: 1. Introduction PART I: STATIC MODELS 2. Unobserved Heterogeneity 3. Error Components 4. Error in Variables PART II: DYNAMIC MODELS 5. Covariance Structures for Dynamic Error Components 6. Autoregressive Models with Individual Effects 7. Models with Predetermined Variables

Testing for serial correlation in linear panel-data models

Abstract: Because serial correlation in linear panel-data models biases the standard errors and causes the results to be less efficient, researchers need to identify serial correlation in the idiosyncratic e...

Unemployment as a Social Norm: Psychological Evidence from Panel Data

Abstract: This article uses seven waves of panel data to test for social norms in labor market status. The unemployed's well‐being is shown to be strongly positively correlated with reference group unemployment (at the regional, partner, or household level). This result, far stronger for men, is robust to controls for unobserved individual heterogeneity. Panel data also show that those whose well‐being fell the most on entering unemployment are less likely to remain unemployed. These findings suggest a psychological explanation of both unemployment polarization and hysteresis, based on the utility effects of a changing employment norm in the reference group.

Microfinance and poverty - evidence using panel data from Bangladesh

Abstract: Micro-finance supports mainly informal activities that often have low market demand. It may be thus hypothesized that the aggregate poverty impact of micro-finance in an economy with low economic growth is modest or nonexistent. The observed borrower-level poverty impact is then a result of income redistribution or short-run income generation. The author addresses these questions using household level panel data from Bangladesh. The findings confirm that micro-finance benefits the poorest and has sustained impact in reducing poverty among program participants. It also has positive spillover impact, reducing poverty at the village level. But the effect is more pronounced in reducing extreme rather than moderate poverty.

Cluster-Sample Methods in Applied Econometrics

Abstract: Inference methods that recognize the clustering of individual observations have been available for more than 25 years. Brent Moulton (1990) caught the attention of economists when he demonstrated the serious biases that can result in estimating the effects of aggregate explanatory variables on individual-specific response variables. The source of the downward bias in the usual ordinary least-squares (OLS) standard errors is the presence of an unobserved, state-level effect in the error term. More recently, John Pepper (2002) showed how accounting for multi-level clustering can have dramatic effects on t statistics. While adjusting for clustering is much more common than it was 10 years ago, inference methods robust to cluster correlation are not used routinely across all relevant settings. In this paper, I provide an overview of applications of cluster-sample methods, both to cluster samples and to panel data sets.

Specification and Estimation of Spatial Panel Data Models

Abstract: This article provides a survey of the specification and estimation of spatial panel data models. These models include spatial error autocorrelation, or the specification is extended with a spatially lagged dependent variable. In particular, the author focuses on the specification and estimation of four panel data models commonly used in applied research: the fixed effects model, the random effects model, the fixed coefficients model, and the random coefficients model. The survey discusses the asymptotic properties of the estimators and provides guidance with respect to the estimation procedures, which should be useful for practitioners.

Microfinance and poverty : evidence using panel data from Bangladesh

Abstract: Micro-finance supports mainly informal activities that often have low market demand. It may be thus hypothesized that the aggregate poverty impact of micro-finance in an economy with low economic growth is modest or nonexistent. The observed borrower-level poverty impact is then a result of income redistribution or short-run income generation. The author addresses these questions using household level panel data from Bangladesh. The findings confirm that micro-finance benefits the poorest and has sustained impact in reducing poverty among program participants. It also has positive spillover impact, reducing poverty at the village level. But the effect is more pronounced in reducing extreme rather than moderate poverty.

The World Price of Earnings Opacity

Abstract: We analyze financial statements from 34 countries for the period 1984–1998 to construct a panel data set measuring three dimensions of reported accounting earnings for each country: earnings aggressiveness, loss avoidance, and earnings smoothing. We hypothesize that these three dimensions are associated with uninformative or opaque earnings, and so we combine these three measures to obtain an overall earnings opacity time‐series measure per country. We then explore whether our three measures of earnings opacity affect two characteristics of an equity market in a country: the return the shareholders demand and how much they trade. While not all results are consistent for our three individual earnings opacity measures, our panel data tests document that, after controlling for other influences, an increase in overall earnings opacity in a country is linked to an economically significant increase in the cost of equity and an economically significant decrease in trading in the stock market of that country.

Growth and Shocks: evidence from rural Ethiopia

Abstract: Using panel data from villages in rural Ethiopia, the paper studies the determinants of consumption growth (1989-97), based on a microgrowth model, controlling for heterogeneity. Consumption grew substantially, but with diverse experiences across villages and individuals. A key focus is on whether shocks affect growth. Rainfall shocks have a substantial impact on consumption growth, and its impact presists for many years. There also appears to be a significant, persistent growth impact from the largescale famine in the 1980s, as well as substantial externalities from the presence of road infrastructure. The findings related to the persistent effects of rainfall shocks and the famine crisis imply that welfare losses due to the lack of insurance and protection measures are well beyond the welfare cost of short term consumption fluctuations.

Explaining Movements in the Labor Share

Abstract: In this paper we study the evolution of the labor share in the OECD since 1970. We show it is essentially related to the capital-output ratio; that this relationship is shifted by factors like the price of imported materials or the skill mix; and that discrepancies between the marginal product of labor and the real wage (due to, e.g., product market power, union bargaining, and labor adjustment costs) cause departures from it. We provide estimates of the model with panel data on 14 industries and 14 countries for 1973-93 and use them to compute the evolution of the wage gap in Germany and the US.

Financial factors and investment in belgium, france, germany, and the united kingdom: a comparison using company panel data

Abstract: We construct company panel data sets for manufacturing firms in Belgium, France, Germany, and the United Kingdom, covering the period 1978–1989. These data sets are used to estimate empirical investment equations, and to investigate the role played by financial factors in each country. A robust finding is that cash flow and profits terms appear to be both statistically and quantitatively more significant in the United Kingdom than in the three continental European countries. This is consistent with the suggestion that financial constraints on investment may be relatively severe in the more market-oriented U.K. financial system.

Finance and the Sources of Growth at Various Stages of Economic Development

Abstract: This paper studies the effects of financial development on the sources of growth in different groups of countries. Recent theoretical work shows that financial development may affect productivity and capital accumulation in different ways in industrial versus developing countries. This hypothesis is tested with panel data from 74 countries using GMM dynamic panel techniques. Results are consistent with the hypothesis: finance has a strong positive influence on productivity growth primarily in more developed economies. In less developed economies, the effect of finance on output growth occurs primarily through capital accumulation.

Distinguishing between Heterogeneity and Inefficiency: Stochastic Frontier Analysis of the World Health Organization S Panel Data on National Health Care Systems

Abstract: The most commonly used approaches to parametric (stochastic frontier) analysis of efficiency in panel data, notably the fixed and random effects models, fail to distinguish between cross individual heterogeneity and inefficiency. This blending of effects is particularly problematic in the World Health Organization s (WHO) panel data set on health care delivery, which is a 191 country, five year panel. The wide variation in cultural and economic characteristics of the worldwide sample of countries produces a large amount of unmeasured heterogeneity in the data. Familiar approaches to inefficiency estimation mistakenly measure that heterogeneity as inefficiency. This study will examine a large number of recently developed alternative approaches to stochastic frontier analysis with panel data, and apply some of them to the WHO data. A more general, flexible model and several measured indicators of cross country heterogeneity are added to the analysis done by previous researchers. Results suggest that in these data, there is considerable evidence of heterogeneity that in other studies using the same data, has masqueraded as inefficiency. Our results differ substantially from those obtained by several earlier researchers.

Solutions Manual and Supplementary Materials for Econometric Analysis of Cross Section and Panel Data

Abstract: This is the essential companion to Jeffrey Wooldridge's widely-used graduate text Econometric Analysis of Cross Section and Panel Data (MIT Press, 2001). Already established as a leading graduate econometrics text, the book offers an intuitive yet rigorous treatment of two methods used in econometric research, cross section and panel data techniques. The numerous end-of-chapter problems are an important component of the book, encouraging the student to use the analytical tools presented in the text. This manual contains answers to selected problems, new examples, and supplementary materials designed by the author. Users of the textbook will find the manual a necessary adjunct to the book.

Evidence from panel unit root and cointegration tests that the environmental Kuznets curve does not exist

Abstract: he Environmental Kuznets Curve (EKC) hypothesis - an inverted U-shape relation between various indicators of environmental degradation and income per capita - has become one of the 'stylised facts' of environmental and resource economics. This is despite considerable criticism on both theoretical and empirical grounds. Cointegration analysis can be used to test the validity of such stylised facts when the data involved contain stochastic trends. In the present paper, we use cointegration analysis to test the EKC hypothesis using a panel dataset of sulfur emissions and GDP data for 74 countries over a span of 31 years. We find that the data is stochastically trending in the time-series dimension. Given this, and interpreting the EKC as a long run equilibrium relationship, support for the hypothesis requires that an appropriate model cointegrates and that sulfur emissions are a concave function of income. Individual and panel cointegration tests cast doubt on the general applicability of the hypothesised relationship. Even when we find cointegration, many of the relationships for individual countries are not concave. The results show that the EKC is a problematic concept, at least in the case of sulfur emissions.

Microeconometric models of investment and employment

Abstract: We survey recent microeconometric research on investment and employment that has used panel data on individual firms or plants. We focus on model specification and econometric estimation issues, but we also review some of the main empirical findings. We discuss advantages and limitations of microeconomic data in this context. We briefly review the neoclassical theory of the demand for capital and labour, on which most of the econometric models of investment and employment that we consider are based. We pay particular attention to dynamic factor demand models, based on the assumption that there are costs of adjustment, which have played a prominent role especially in the microeconometric literature on investment. With adjustment costs, current choices depend on expectations of future conditions. We discuss the challenges that this raises for econometric model specification, and some of the solutions that have been adopted. We also discuss estimation issues that arise for dynamic factor demand equations in the context of micro panel data for firms or plants. We then discuss a number of topics that have been the focus of recent microeconometric research on investment and employment. In particular, we review the literatures on investment and financing constraints, relative price effects on investment and employment, investment and uncertainty, investment in research and development (R&D), elasticities of substitution and complementarity between technology, capital and skilled and unskilled labour, and recent work on models with non-convex adjustment costs.

Microfinance and Poverty: Evidence Using Panel Data from Bangladesh

Abstract: Micro-finance supports mainly informal activities that often have low market demand. It may be thus hypothesized that the aggregate poverty impact of micro-finance in an economy with low economic growth is modest or nonexistent. The observed borrower-level poverty impact is then a result of income redistribution or short-run income generation. Khandker addresses these questions using household level panel data from Bangladesh. The findings confirm that micro-finance benefits the poorest and has sustained impact in reducing poverty among program participants. It also has positive spillover impact, reducing poverty at the villate level. But the effect is more pronounced in reducing extreme rather than moderate poverty. This paper - a product of Rural Development, Development Research Group - is part of a larger effort in the group to analyze the impact of targeted programs on the poor.

U.S. Cross-Listings and the Private Benefits of Control: Evidence from Dual Class Shares

Abstract: Non-U.S. firms that cross-list on U.S. exchanges have voting premiums that are on average 43% lower than other non-U.S. firms that do not cross-list. Using a panel data set comprised of 745 firms that have dual class shares, this paper shows that the difference in voting premiums is statistically significant after controlling for firm and country level characteristics and that this result is robust to alternative benchmarks and methodologies. Further, it finds that the difference in voting premiums is larger for firms from countries that provide poor protection to minority investors. An event study shows that, on average, both the high and low voting share classes benefit when firms announce they will cross-list in the U.S. However, the low voting class benefits by a larger amount, which leads to the decrease in the voting premium. Overall, the evidence supports the bonding hypothesis: cross-listing in the U.S. improves the protection afforded to minority investors and decreases the private benefits of control.

Explaining Firms’ Export Behaviour: R&D, Spillovers and the Destination Market*

Abstract: We examine the importance of a firm's own R&D activity and intra-sectoral spillovers on the decision to export and the export intensity using firm level panel data for Spain for the period 1990-98. Own R&D activity is found to be an important determinant of export activity. There is little evidence to suggest that Spanish firms benefit from spillovers of the exporting activity of others. However, there is evidence that R&D spillovers exert positive effects on firms' export ratios. We find a larger marginal impact of R&D spillovers on export intensity of firms exporting to other OECD countries than those exporting to non-OECD nations.

Doing Well by Doing Good: Volunteering and Occupational Achievement among American Women

Abstract: The popular assumption that volunteer work helps people get good jobs is tested using panel data from the Young Women's Module of the National Longitudinal Survey of Labor Market Experience. Volunt...

Elected versus appointed regulators: theory and evidence

Abstract: This paper contrasts direct election with political appointment of regulators. When regulators are appointed, regulatory policy becomes bundled with other policy issues the appointing politicians are responsible for. Because voters have only one vote to cast and regulatory issues are not salient for most voters, there are electoral incentives to respond to stakeholder interests. If regulators are elected, their stance on regulation is the only salient issue so that the electoral incentive is to run a pro-consumer candidate. Using panel data on regulatory outcomes from U.S. states, we find new evidence in favor of the idea that elected states are more pro-consumer in their regulatory policies. (JEL: H1, K2)

Public Finances and Long-Term Growth in Europe - Evidence from a Panel Data Analysis

Abstract: In Lisbon the European Council proclaimed a European growth strategy. It considers an average economic "growth rate of around 3 percent as a realistic prospect for the coming years" and assigns public finances an important role in the process of achieving this goal. This paper addresses the question whether we can find empirical evidence for European countries that public finance reform affects trend growth. Focusing on time series patterns, we investigate whether there have been persistent shifts or trends in economic growth and fiscal variables over the last 40 years. In addition, we estimate a distributed lag model, which 1) indicates that government consumption and transfers negatively affect growth rates of GDP per capita over the business cycle, while public investment has a positive impact, and 2) provides robust evidence that distortionary taxation affects growth in the medium-term through its impact on the accumulation of private physical capital.

Does Financial Liberalization Reduce Financing Constraints

Abstract: We use panel data on a large number of firms in 13 developing countries to find out whether financial liberalization relaxes financing constraints of firms. We find that liberalization affects small and large firms differently. Small firms are financially constrained before the start of the liberalization process, but become less so after liberalization. Financing constraints of large firms, however, are low before financial liberalization, but become higher as financial liberalization proceeds. We hypothesize that financial liberalization has adverse effects on the financing constraints of large firms, because these firms had better access to preferential directed credit during the period before financial liberalization. JEL Classification Codes: E22, E44, G31, O16

The Long-Run Relationship between House Prices and Income : Evidence from Local Housing Markets

Abstract: The proposition that "housing prices can't continue to outpace growth in household income" (Wall Street Journal; July 25, 2002) is the received wisdom among many housing-market observers. More formally, many in the housing literature argue that house prices and income are cointegrated. In this paper, I show that the data do not support this view. Standard tests using 27 years of national-level data do not find evidence of cointegration. However, it is known that tests for cointegration have low power, especially in small samples. I use panel-data tests for cointegration that have been shown to be more powerful than their standard time-series counterparts to test for cointegration in a panel of 95 metro areas over 23 years. Using a bootstrap approach to allow for cross-correlations in city-level house-price shocks, I show that even these more powerful tests do not reject the hypothesis of no cointegration. Thus the error-correction specification for house prices and income commonly found in the literature may be inappropriate.