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Estimating Standard Errors For The Parks Model: Can Jackknifing Help?

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Abstract

Non-spherical errors, namely heteroscedasticity, serial correlation and cross-sectional correlation are commonly present within panel data sets. These can cause significant problems for econometric analyses. The FGLS(Parks) estimator has been demonstrated to produce considerable efficiency gains in these settings. However, it suffers from underestimation of coefficient standard errors, oftentimes severe. Potentially, jackknifing the FGLS(Parks) estimator could allow one to maintain the efficiency advantages of FGLS(Parks) while producing more reliable estimates of coefficient standard errors. Accordingly, this study investigates the performance of the jackknife estimator of FGLS(Parks) using Monte Carlo experimentation. We find that jackknifing can -- in narrowly defined situations -- substantially improve the estimation of coefficient standard errors. However, its overall performance is not sufficient to make it a viable alternative to other panel data estimators.

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File URL: http://www.econ.canterbury.ac.nz/RePEc/cbt/econwp/0918.pdf
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Paper provided by University of Canterbury, Department of Economics and Finance in its series Working Papers in Economics with number 09/18.

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Length: 12 pages
Date of creation: 15 Nov 2009
Date of revision:
Handle: RePEc:cbt:econwp:09/18

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Keywords: Panel Data estimation; Parks model; cross-sectional correlation; jackknife; Monte Carlo;

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  1. W. Robert Reed & Haichun Ye, 2009. "Which panel data estimator should I use?," Applied Economics, Taylor & Francis Journals, vol. 43(8), pages 985-1000.
  2. W. Robert Reed & Rachel Webb, 2010. "The PCSE Estimator is Good -- Just Not as Good as You Think," Working Papers in Economics 10/53, University of Canterbury, Department of Economics and Finance.
  3. Sunil Sapra, 2002. "A jackknife maximum likelihood estimator for the probit model," Applied Economics Letters, Taylor & Francis Journals, vol. 9(2), pages 73-74.
  4. A. Colin Cameron & Jonah B. Gelbach & Douglas L. Miller, 2007. "Bootstrap-Based Improvements for Inference with Clustered Errors," NBER Technical Working Papers 0344, National Bureau of Economic Research, Inc.
  5. Roll, Richard & Schwartz, Eduardo & Subrahmanyam, Avanidhar, 2009. "Options trading activity and firm valuation," Journal of Financial Economics, Elsevier, vol. 94(3), pages 345-360, December.
  6. Roger Congleton & Feler Bose, 2010. "The rise of the modern welfare state, ideology, institutions and income security: analysis and evidence," Public Choice, Springer, vol. 144(3), pages 535-555, September.
  7. Breunig, Robert, 2001. "Bias Correction for Inequality Measures: An application to China and Kenya," Departmental Working Papers 2001-06, The Australian National University, Arndt-Corden Department of Economics.
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Cited by:
  1. Economou, Athina & Gavroglou, Stavros & Kollias, Christos, 2013. "Economic fluctuations and political self-placement," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 46(C), pages 57-65.

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