Estimation of Panel Data Models with Interactive Effects and Multiple Structural Breaks When T Is Fixed

Yousef Kaddoura () and Joakim Westerlund
Additional contact information
Yousef Kaddoura: Department of Economics, Lund University, Postal: School of Economics and Management, Box 7080, S-220 07 Lund, Sweden

No 2021:15, Working Papers from Lund University, Department of Economics

Abstract: In this article, we propose a new estimator of panel data models with interactive fixed effects and multiple structural breaks that is suitable when the number of time periods, T, is fixed and only the number of cross-sectional units, N, is large. This is done by viewing the determination of the breaks as a shrinkage problem, and to estimate both the regression coefficients, and the number of breaks and their locations by applying a version of the Lasso approach. We show that with probability approaching one the approach can correctly determine the number of breaks and the dates of these breaks, and that the estimator of the regime-specific regression coefficients is consistent and asymptotically normal. We also provide Monte Carlo results suggesting that the approach performs very well in small samples, and empirical results suggesting that the coefficients of the deterrence model of crime are not constant as typically assumed but subject to structural change.

Keywords: Panel data; Interactive effects; Common factors; Structural change; Lasso (search for similar items in EconPapers)
JEL-codes: C13 C23 C33 K42 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2021-11-15
New Economics Papers: this item is included in nep-ecm and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://lucris.lub.lu.se/ws/portalfiles/portal/177122361/WP21_15 Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:lunewp:2021_015

Access Statistics for this paper

More papers in Working Papers from Lund University, Department of Economics School of Economics and Management, Box 7080, S-22007 Lund, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Iker Arregui Alegria ().