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Identifying distributional characteristics in random coefficients panel data models

Author

Listed:
  • Manuel Arellano

    (Institute for Fiscal Studies and Centre for Monetary and Financial Studies (CEMFI))

  • Stéphane Bonhomme

    (Institute for Fiscal Studies and University of Chicago)

Abstract

We study the identification of panel models with linear individual-specific coefficients, when T is fixed. We show identification of the variance of the effects under conditional uncorrelatedness. Identification requires restricted dependence of errors, reflecting a trade-off between heterogeneity and error dynamics. We show identification of the density of individual effects when errors follow an ARMA process under conditional independence. We discuss GMM estimation of moments of effects and errors, and introduce a simple density estimator of a slope effect in a special case. As an application we estimate the effect that a mother smokes during pregnancy on child's birth weight.

Suggested Citation

  • Manuel Arellano & Stéphane Bonhomme, 2009. "Identifying distributional characteristics in random coefficients panel data models," CeMMAP working papers CWP22/09, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:cemmap:22/09
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    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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