Identification of linear panel data models when instruments are not available
Laura Magazzini and
Giorgio Calzolari
No 06/2012, Working Papers from University of Verona, Department of Economics
Abstract:
One of the major virtues of panel data models is the possibility to control for unobserved and unobservable heterogeneity at the unit (individual, firm, sector...) level, even when this is correlated with the variables included on the right hand side of the equation. By assuming an additive error structure, identification of the model parameters spans from transformations of the data that wipe out the individual component. We propose an alternative identification strategy, where the equation of interest is embedded in a structural system that properly accounts for the endogeneity of the variables on the right hand side (without distinguishing correlation with the individual component or the idiosyncratic term). We show that, under certain conditions, the system is identified even in the case where no exogenous variable is available, due to the presence of cross-equation restrictions. Estimation of the model parameters can rely on an iterated Zellner-type estimator, with remarkable performance gains over traditional GMM approaches.
Keywords: panel data; identification; cross-equation restrictions (search for similar items in EconPapers)
JEL-codes: C23 C33 (search for similar items in EconPapers)
Date: 2012-02
New Economics Papers: this item is included in nep-ecm
References: Add references at CitEc
Citations:
Downloads: (external link)
http://dse.univr.it//workingpapers/WP62012.pdf First version (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:ver:wpaper:06/2012
Access Statistics for this paper
More papers in Working Papers from University of Verona, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Michael Reiter (michael.reiter@univr.it).