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Joining Panel Data with Cross-Sections for Efficiency Gains: An Application to a Consumption Equation for Nicaragua

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Author Info
Randolph Bruno () (DARRT, University of Bologna and IZA)
Marco Stampini () (Sant’Anna School of Advanced Studies)

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Abstract

This paper explores how cross-sectional data can be exploited jointly with longitudinal data, in order to increase estimation efficiency while properly tackling the potential bias due to unobserved individual characteristics. We propose an innovative procedure and we show its implementation by analysing the determinants of consumption in Nicaragua, based on data from three Living Standard Measurement Study surveys from 1993, 1998 and 2001. The last two rounds constitute an unbalanced longitudinal data set, while the first is a cross-section of different households. Under the assumption that the relationship between observed and unobserved characteristics is homogeneous across time, information from longitudinal data is used to clean the bias in the unpaired sample. In a second step, corrected unpaired observations are used jointly with panel data. This reduces the standard errors of the estimation coefficients and might increase their significance as well, otherwise compromised by the limited variation provided by the short longitudinal data.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3231.

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Length: 26 pages
Date of creation: Dec 2007
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Handle: RePEc:iza:izadps:dp3231

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Related research
Keywords: panel data; estimation efficiency; pseudo-panel; consumption model; Nicaragua;

Other versions of this item:

Find related papers by JEL classification:
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
C42 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Survey Methods
I38 - Health, Education, and Welfare - - Welfare and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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References listed on IDEAS
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  1. Benjamin Davis & Marco Stampini, 2002. "Pathways Towards Prosperity in Rural Nicaragua: Why households drop in and out of poverty, and some policy suggestions on how to keep them out," Working Papers 02-12, Agricultural and Development Economics Division of the Food and Agriculture Organization of the United Nations (FAO - ESA). [Downloadable!]
  2. Deaton, Angus, 1985. "Panel data from time series of cross-sections," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 109-126. [Downloadable!] (restricted)
  3. Marco Stampini & Benjamin Davis, 2003. "Discerning Transient from Chronic Poverty in Nicaragua: Measurement with a two period panel data set," Working Papers 03-03, Agricultural and Development Economics Division of the Food and Agriculture Organization of the United Nations (FAO - ESA). [Downloadable!]
  4. Nijman, Theo & Verbeek, Marno, 1990. "Estimation of time-dependent parameters in linear models using cross-sections, panels, or both," Journal of Econometrics, Elsevier, vol. 46(3), pages 333-346, December. [Downloadable!] (restricted)
  5. Berhman, J.R., 1990. "The action of human resources and poverty on one another: what we have yet to learn," Papers 74, World Bank - Living Standards Measurement.
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