 Heterogeneous Autoregressions in Short T Panel Data ModelsMohammad Pesaran and Liying Yang No 10509, CESifo Working Paper Series from CESifo Abstract: This paper considers a first-order autoregressive panel data model with individual-specific effects and heterogeneous autoregressive coefficients defined on the interval (˗1; 1], thus allowing for some of the individual processes to have unit roots. It proposes estimators for the moments of the cross-sectional distribution of the autoregressive (AR) coefficients, assuming a random coefficient model for the autoregressive coefficients without imposing any restrictions on the fixed effects. It is shown the standard generalized method of moments estimators obtained under homogeneous slopes are biased. Small sample properties of the proposed estimators are investigated by Monte Carlo experiments and compared with a number of alternatives, both under homogeneous and heterogeneous slopes. It is found that a simple moment estimator of the mean of heterogeneous AR coefficients performs very well even for moderate sample sizes, but to reliably estimate the variance of AR coefficients much larger samples are required. It is also required that the true value of this variance is not too close to zero. The utility of the heterogeneous approach is illustrated in the case of earnings dynamics. Keywords: heterogeneous dynamic panels; neglected heterogeneity bias; short T panels; earnings dynamics (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_10509 Access Statistics for this paper More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC. |
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