The two-way Hausman and Taylor estimator

Badi Baltagi

Economics Letters, 2023, vol. 228, issue C

Abstract: This paper reconsiders the two-way Hausman and Taylor (1981) estimator suggested by Wyhowski (1994). The two-way HT estimator allows some but not necessarily all the regressors to be correlated with the individual and time effects. It also allows the estimation of the effects of time-invariant as well as individual-invariant regressors which are wiped out by the two-way fixed effects estimator. Hausman type tests are proposed for this two-way HT regression to test the over-identification conditions implied by the choice of the uncorrelated regressors. This should prove useful for empirical work in this area.

Keywords: Two-way error components model; Panel data; Fixed and random effects; Hausman test; Hausman and Taylor estimator. (search for similar items in EconPapers)
JEL-codes: C33 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:228:y:2023:i:c:s0165176523001842

DOI: 10.1016/j.econlet.2023.111159

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