Using Lasso-Type Penalties to Model Time-Varying Covariate Effects in Panel Data Regressions - A Novel Approach Illustrated by the 'Death of Distance' in International Trade
AbstractWhen analyzing panel data using regression models, it is often reasonable to allow for time-varying covariate effects. We propose a novel approach to modelling timevarying coefficients in panel data regressions, which is based on penalized regression techniques. To illustrate the usefulness of this approach, we revisit the well-known empirical puzzle of the 'death of distance' in international trade. We find significant differences between results obtained with the proposed estimator and those obtained with 'traditional' methods. The proposed method can also be used for model selection, and to allow covariate effects to vary over other dimensions than time.
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Bibliographic InfoPaper provided by Lund University, Department of Economics in its series Working Papers with number 2013:5.
Length: 30 pages
Date of creation: 19 Feb 2013
Date of revision:
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Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund,Sweden
Phone: +46 +46 222 0000
Fax: +46 +46 2224613
Web page: http://www.nek.lu.se/
More information through EDIRC
Penalized Regression; Lasso-type Penalties; Varying Coefficient Models; Gravity; Death of Distance; Missing Globalization Puzzle;
Other versions of this item:
- Hess, Wolfgang & Persson, Maria & Rubenbauer, Stephanie & Gertheiss, Jan, 2013. "Using Lasso-Type Penalties to Model Time-Varying Covariate Effects in Panel Data Regressions – A Novel Approach Illustrated by the ‘Death of Distance’ in International Trade," Working Paper Series 961, Research Institute of Industrial Economics.
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
- F10 - International Economics - - Trade - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-03-09 (All new papers)
- NEP-ECM-2013-03-09 (Econometrics)
- NEP-GEO-2013-03-09 (Economic Geography)
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