Another Look At What To Do With Time-Series Cross-Section Data

Xiujian Chen, Shu Lin and W. Reed ()
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Xiujian Chen: University of Oklahoma

Econometrics from University Library of Munich, Germany

Abstract: Our study revisits Beck and Katz’ (1995) comparison of the Parks and PCSE estimators using time-series, cross-sectional data (TSCS). Our innovation is that we construct simulated statistical environments that are designed to closely match “real-world,” TSCS data. We pattern our statistical environments after income and tax data on U.S. states from 1960-1999. While PCSE generally does a better job than Parks in estimating standard errors, it too can be unreliable, sometimes producing standard errors that are substantially off the mark. Further, we find that the benefits of PCSE can come at a substantial cost in estimator efficiency. Based on our study, we would give the following advice to researchers using TSCS data: Given a choice between Parks and PCSE, we recommend that researchers use PCSE for hypothesis testing, and Parks if their primary interest is accurate coefficient estimates.

Keywords: Panel Data; Panel Corrected Standard Errors; Monte Carlo analysis (search for similar items in EconPapers)
JEL-codes: C1 C2 C3 C4 C5 C8 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2005-06-08
New Economics Papers: this item is included in nep-ecm
Note: Type of Document - pdf; pages: 26
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Citations: View citations in EconPapers (7)

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Related works:
Working Paper: Another Look at what to do with Time-series Cross-section Data (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpem:0506004

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