Practical notes on panel data models with interactive effects

Bai, Jushan and Li, Kunpeng (2017): Practical notes on panel data models with interactive effects.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: observable factors, observable factor loadings, common regressors, time-invariant regressors
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C33 - Panel Data Models ; Spatio-temporal Models; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C38 - Classification Methods ; Cluster Analysis ; Principal Components ; Factor Models

References

Bai, J. (2009): Panel data models with interactive fixed effects, Econometrica, 77 (4), 1229-1279.

Bai, J. and K.P. Li (2014): Theory and methods of panel data models with interactive effects, The Annals of Statistics, 42 (1), 142-170