Specification and estimation of random effects models with serial correlation of general form

Jimmy Skoglund () and Sune Karlsson ()
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Jimmy Skoglund: Dept. of Economic Statistics, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, S-113 83 Stockholm, Sweden

No 433, SSE/EFI Working Paper Series in Economics and Finance from Stockholm School of Economics

Abstract: This paper is concerned with maximum likelihood based inference in random effects models with serial correlation. Allowing for individual effects we introduce serial correlation of general form in the time effects as well as the idiosyncratic errors. A straightforward maximum likelihood estimator is derived and a coherent model selection strategy is suggested for determining the orders of serial correlation as well as the importance of time and individual effects. The methods are applied to the estimation of a production function for the Japanese chemical industry using a sample of 72 firms observed during 1968-1987. Empirically, our focus is on measuring the returns to scale and technical change for the industry.

Keywords: Panel data; serial correlation; random effects (search for similar items in EconPapers)
JEL-codes: C12 C13 C23 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2001-02-13
New Economics Papers: this item is included in nep-ecm
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:hhs:hastef:0433

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