Modal Regression for Fixed Effects Panel Data

Aman Ullah, Tao Wang and Weixin Yao ()
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Weixin Yao: University of California Riverside

No 202102, Working Papers from University of California at Riverside, Department of Economics

Abstract: Most research on panel data focuses on mean or quantile regression while there is not much research about regression methods based on the mode. In this paper, we propose a new model named fixed effects modal regression for panel data in which we model how the conditional mode of the response variable depends on the covariates, and employ a kernel based objective function to simplify the computation. The proposed modal regression can complement the mean and quantile regressions, and provide better central tendency measure and prediction performance when the data is skewed. We present a linear dummy modal regression (LDMR) method and a pseudo-demodeing two-step (PDTS) method to estimate the proposed modal regression. The computations can be easily implemented using a modified modal-expectation-maximization (MEM) algorithm. We investigate the asymptotic properties of the modal estimators under some mild regularity conditions when the number of individuals, N, and the number of time periods, T, go to infinity. The optimal bandwidths with order (NT)^-1/7 are obtained by minimizing the asymptotic weighted mean squared errors. Monte Carlo simulations and two real data analyses of a public capital productivity study and a carbon dioxide (CO2) emissions study are presented to demonstrate the finite sample performance of the newly proposed modal regression.

Keywords: Asymptotic property; Fixed effects; MEM algorithm; Modal regression; Panel data; Estimation. (search for similar items in EconPapers)
JEL-codes: C01 C14 C23 C51 (search for similar items in EconPapers)
Pages: 38 Pages
Date: 2020-06, Revised 2020-11
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: View citations in EconPapers (1)

Forthcoming in Empirical Economics

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https://economics.ucr.edu/repec/ucr/wpaper/202102.pdf First version, 2020 (application/pdf)
https://economics.ucr.edu/repec/ucr/wpaper/202102R.pdf Revised version, 2020 (application/pdf)

Related works:
Journal Article: Modal regression for fixed effects panel data (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:ucr:wpaper:202102

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