To Pool or Not to Pool: A Partially Heterogeneous Framework
AbstractThis paper proposes a partially heterogeneous framework for the analysis of panel data with fixed T , based on the concept of "partitional clustering". In particular, the population of cross-sectional units is grouped into clusters, such that parameter homogeneity is maintained only within clusters. To de- termine the (unknown) number of clusters we propose an information-based criterion, which, as we show, is strongly consistent - i.e. it selects the true number of clusters with probability one as N approaches infinity. Simulation experiments show that the proposed criterion performs well even with moderate N and the resulting parameter estimates are close to the true values. We apply the method in a panel data set of commercial banks in the US and we find four clusters, with significant differences in the slope parameters across clusters.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 20814.
Date of creation: 08 Dec 2009
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Partial heterogeneity; partitional clustering; information-based criterion; model selection;
Find related papers by JEL classification:
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
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