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To Pool or Not to Pool: Revisited

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  • M. Hashem Pesaran
  • Qiankun Zhou

Abstract

This paper provides a new comparative analysis of pooled least squares and fixed effects (FE) estimators of the slope coefficients in the case of panel data models when the time dimension (T) is fixed while the cross section dimension (N) is allowed to increase without bounds. The individual effects are allowed to be correlated with the regressors, and the comparison is carried out in terms of an exponent coefficient, δ, which measures the degree of pervasiveness of the FE in the panel. The use of δ allows us to distinguish between poolability of small N dimensional panels with large T from large N dimensional panels with small T. It is shown that the pooled estimator remains consistent so long as δ

Suggested Citation

  • M. Hashem Pesaran & Qiankun Zhou, 2018. "To Pool or Not to Pool: Revisited," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 80(2), pages 185-217, April.
  • Handle: RePEc:bla:obuest:v:80:y:2018:i:2:p:185-217
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    File URL: https://doi.org/10.1111/obes.12220
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    References listed on IDEAS

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    1. Natalia Bailey & George Kapetanios & M. Hashem Pesaran, 2016. "Exponent of Cross‐Sectional Dependence: Estimation and Inference," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 31(6), pages 929-960, September.
    2. Pesaran, M. Hashem, 2015. "Time Series and Panel Data Econometrics," OUP Catalogue, Oxford University Press, number 9780198759980.
    3. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
    4. Badi H. Baltagi & James M. Griffin & Weiwen Xiong, 2000. "To Pool Or Not To Pool: Homogeneous Versus Hetergeneous Estimations Applied to Cigarette Demand," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 117-126, February.
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    More about this item

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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