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Inference on Time-Invariant Variables using Panel Data: A Pre-Test Estimator with an Application to the Returns to Schooling

Jean-Bernard Chatelain () and Kirsten Ralf

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Abstract: This paper proposes a new pre-test estimator of panel data models including time invariant variables based upon the Mundlak-Krishnakumar estimator and an "unrestricted" Hausman-Taylor estimator. The paper evaluates the biases of currently used restricted estimators, omitting the average-over-time of at least one endogenous time-varying explanatory variable. Repeated Between, Ordinary Least Squares, Two stage restricted Between and Oaxaca-Geisler estimator, Fixed Effect Vector Decomposition, Generalized least squares may lead to wrong conclusions regarding the statistical significance of the estimated parameter values of time-invariant variables.

Keywords: Time-Series Cross-Sections; Panel data; Time-Invariant Variables; Pre-Test Estimator; Mundlak Estimator; Fixed Effects Vector Decomposition (search for similar items in EconPapers)
Date: 2010-01-15
New Economics Papers: this item is included in nep-ecm
Note: View the original document on HAL open archive server: https://hal-paris1.archives-ouvertes.fr/hal-00492039
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Working Paper: Inference on Time-Invariant Variables using Panel Data: A Pre-Test Estimator with an Application to the Returns to Schooling (2010) Downloads
Working Paper: Inference on Time-Invariant Variables using Panel Data: A Pre-Test Estimator with an Application to the Returns to Schooling (2010) Downloads
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