The Two-Way Error Component Model

Badi Baltagi

Chapter 3 in A Companion to Econometric Analysis of Panel Data, 2026, pp 41-79 from Springer

Abstract: Abstract Note that λ t $$\lambda _{t}$$ is individual-invariant and it accounts for any time-specific effect that is not included in the regression. For example, it could account for strike year effects that disrupt production; oil embargo effects that disrupt the supply of oil and affect its price; Surgeon General reports on the ill-effects of smoking; or government laws restricting smoking in public places, all of which could affect consumption behavior.

Date: 2026
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DOI: 10.1007/978-3-032-09687-6_3

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