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Econometrics: Panel Data Methods

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Encyclopedia of Complexity and Systems Science

Definition of the Subject

Panel data consist of repeated observations over time on the same set of cross-sectional units. These units can be individuals, firms, schools,cities, or any collection of units one can follow over time. Special econometric methods have been developed to recognize and exploit the rich informationavailable in panel data sets. Because the time dimension is a key feature of panel data sets, issues of serial correlation and dynamic effects needto be considered. Further, unlike the analysis of cross-sectional data, panel data sets allow the presence of systematic, unobserved differences acrossunits that can be correlated with observed factors whose effects are to be measured. Distinguishing between persistence due to unobserved heterogeneityand that due to dynamics in the underlying process isa leading challenge for interpreting estimates from paneldata models.

Panel data methods are the econometric tools used to estimate parameters compute partial effects of...

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Abbreviations

Panel data:

Data on a set of cross-sectional units followed over time.

Unobserved effects:

Unobserved variables that affect the outcome which are constant over time.

Fixed effects estimation:

An estimation method that removes the unobserved effects, implying that the unobserved effects can be arbitrarily related to the observed covariates.

Correlated random effects:

An approach to modeling where the dependence between the unobserved effects and the history of the covariates is parametrically modeled. The traditional random effects approach is a special case under the assumption that he unobserved effects are independent of the covariates.

Average partial effect:

The partial effect of a covariate averaged across the distribution of the unobserved effects.

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Author information

Authors and Affiliations

  1. Department of Economics, Michigan State University, East Lansing, USA

    Jeffrey M. Wooldridge

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  1. Jeffrey M. Wooldridge
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Editor information

Editors and Affiliations

  1. RAMTECH LIMITED, 122 Escalle Lane, Larkspur, CA, 94939, USA

    Robert A. Meyers Ph. D. (Editor-in-Chief) (Editor-in-Chief)

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© 2009 Springer-Verlag

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Wooldridge, J.M. (2009). Econometrics: Panel Data Methods. In: Meyers, R. (eds) Encyclopedia of Complexity and Systems Science. Springer, New York, NY. https://doi.org/10.1007/978-0-387-30440-3_167

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