1. Panel Data Analysis Using GAUSS1
Kuan-Pin Lin Portland State University

2. Panel Data Analysis Introduction
Panel Data Definition
Unbalanced Panel
Balanced Panel:
Short Panel:
Long Panel:
Panel Data Analysis
Unobserved Heterogeneity
Cross Section and Time Series Correlation

3. Panel Data Analysis Introduction
Model Representation
N-first or T-first representation
Pooled Model
Fixed Effects Model
Random Effects Model
Asymptotic Theory
N→∞, or T→∞
N→∞, T→∞
Panel-Robust Inference

4. Panel Data Analysis Introduction
The Model
One-Way (Individual) Effects:
Unobserved Heterogeneity
Cross Section and Time Series Correlation

5. Panel Data Analysis Introduction
N-first Representation
Dummy Variables Representation
T-first Representation

6. Panel Data Analysis Introduction
Notations

7. Pooled (Constant Effects) Model

8. Fixed Effects Model
ui is fixed, independent of eit, and may be correlated with xit.

9. Fixed Effects Model Fixed Effects Model Classical Assumptions
Strict Exogeneity:
Homoschedasticity:
No cross section and time series correlation:
Extensions:
Panel Robust Variance-Covariance Matrix

10. Random Effects Model Error Components
ui is random, independent of eit and xit.
Define the error components as eit = ui + eit

11. Random Effects Model Random Effects Model Classical Assumptions
Strict Exogeneity
X includes a constant term, otherwise E(ui|X)=u.
Homoschedasticity
Constant Auto-covariance (within panels)

12. Random Effects Model Random Effects Model
Classical Assumptions (Continued)
Cross Section Independence
Extensions:
Panel Robust Variance-Covariance Matrix

13. Example: Investment Demand
Grunfeld and Griliches [1960]
i = 10 firms: GM, CH, GE, WE, US, AF, DM, GY, UN, IBM; t = 20 years:
Iit = Gross investment
Fit = Market value
Cit = Value of the stock of plant and equipment

14. Example: Output Function
Cobb-Douglas Output Function
i = 30 provinces; t = 11 years:
ln(GDP)it = Log real GDP
ln(L)it = Log Labor Employment
ln(K)it = Log Capital Stock

15. References
B. H. Baltagi, Econometric Analysis of Panel Data, 4th ed., John Wiley, New York, 2008.
W. H. Greene, Econometric Analysis, 7th ed., Chapter 11: Models for Panel Data, Prentice Hall, 2011.
C. Hsiao, Analysis of Panel Data, 2nd ed., Cambridge University Press, 2003.
J. M. Wooldridge, Econometric Analysis of Cross Section and Panel Data, The MIT Press, 2002.