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

Author

Listed:
  • Jean-Bernard Chatelain

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Kirsten Ralf

    (PSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)

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.

Suggested Citation

  • Jean-Bernard Chatelain & Kirsten Ralf, 2010. "Inference on Time-Invariant Variables using Panel Data: A Pre-Test Estimator with an Application to the Returns to Schooling," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00492039, HAL.
  • Handle: RePEc:hal:cesptp:hal-00492039
    Note: View the original document on HAL open archive server: https://paris1.hal.science/hal-00492039
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    Cited by:

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    3. Andrew Bell & Malcolm Fairbrother & Kelvyn Jones, 2019. "Fixed and random effects models: making an informed choice," Quality & Quantity: International Journal of Methodology, Springer, vol. 53(2), pages 1051-1074, March.
    4. Varvara Isyuk, 2014. "Resuming bank lending in the aftermath of the Capital Purchase Program," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01093414, HAL.
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    6. Varvara Isyuk, 2014. "Resuming bank lending in the aftermath of the Capital Purchase Program," Post-Print halshs-01093414, HAL.
    7. Chatelain, Jean-Bernard & Ralf, Kirsten, 2021. "Inference on time-invariant variables using panel data: A pretest estimator," Economic Modelling, Elsevier, vol. 97(C), pages 157-166.
    8. Daeheon Choi & Chune Young Chung & Mira Yoon & Jason Young, 2020. "Factors in a Sustainable Labor Market: Evidence from New College Graduates’ Initial Job Placement in Korea," Sustainability, MDPI, vol. 12(6), pages 1-22, March.
    9. Paul Van Rompuy, 2016. "Sub-national Tax Autonomy and Deficits: Empirical Results for 27 OECD Countries," Regional Studies, Taylor & Francis Journals, vol. 50(7), pages 1248-1259, July.
    10. Varvara Isyuk, 2014. "Resuming bank lending in the aftermath of the Capital Purchase Program," Documents de travail du Centre d'Economie de la Sorbonne 14062, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    11. Bell, Andrew & Jones, Kelvyn, 2015. "Explaining Fixed Effects: Random Effects Modeling of Time-Series Cross-Sectional and Panel Data," Political Science Research and Methods, Cambridge University Press, vol. 3(1), pages 133-153, January.
    12. Daeheon Choi & Chune Young Chung & Ha Truong, 2019. "Return on Education in Two Major Vietnamese Cities," Sustainability, MDPI, vol. 11(18), pages 1-30, September.

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