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Estimating and testing a quantile regression model with interactive effects

  • Harding, Matthew
  • Lamarche, Carlos
Registered author(s):

    This paper proposes a quantile regression estimator for a model with interactive effects potentially correlated with covariates. We provide conditions under which the estimator is asymptotically Gaussian and we investigate the finite sample performance of the method. An approach to testing the specification against a competing fixed effects specification is introduced. The paper presents an application to study the effect of class size and composition on educational attainment. The evidence suggests that while smaller classes are beneficial for low performers, larger classes are beneficial for high performers. The fixed effects specification is rejected in favor of the interactive effects specification.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0304407613001607
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    Article provided by Elsevier in its journal Journal of Econometrics.

    Volume (Year): 178 (2014)
    Issue (Month): P1 ()
    Pages: 101-113

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    Handle: RePEc:eee:econom:v:178:y:2014:i:p1:p:101-113
    Contact details of provider: Web page: http://www.elsevier.com/locate/jeconom

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    1. Eric A. Hanushek & John F. Kain & Jacob M. Markman & Steven G. Rivkin, 2001. "Does Peer Ability Affect Student Achievement?," NBER Working Papers 8502, National Bureau of Economic Research, Inc.
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    3. Bandiera, Oriana & Larcinese, Valentino & Rasul, Imran, 2009. "Heterogeneous Class Size Effects: New Evidence from a Panel of University Students," CEPR Discussion Papers 7512, C.E.P.R. Discussion Papers.
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    12. Lamarche, Carlos, 2010. "Robust penalized quantile regression estimation for panel data," Journal of Econometrics, Elsevier, vol. 157(2), pages 396-408, August.
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    14. Harding, Matthew & Lamarche, Carlos, 2009. "A quantile regression approach for estimating panel data models using instrumental variables," Economics Letters, Elsevier, vol. 104(3), pages 133-135, September.
    15. Chernozhukov, Victor & Hansen, Christian, 2006. "Instrumental quantile regression inference for structural and treatment effect models," Journal of Econometrics, Elsevier, vol. 132(2), pages 491-525, June.
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    23. Victor Chernozhukov & Christian Hansen, 2005. "An IV Model of Quantile Treatment Effects," Econometrica, Econometric Society, vol. 73(1), pages 245-261, 01.
    24. Lingjie Ma & Roger Koenker, 2004. "Quantile regression methods for recursive structural equation models," CeMMAP working papers CWP01/04, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    25. Alan B. Krueger, 1999. "Experimental Estimates Of Education Production Functions," The Quarterly Journal of Economics, MIT Press, vol. 114(2), pages 497-532, May.
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    27. Victor Chernozhukov & Iván Fernández‐Val & Jinyong Hahn & Whitney Newey, 2013. "Average and Quantile Effects in Nonseparable Panel Models," Econometrica, Econometric Society, vol. 81(2), pages 535-580, 03.
    28. Ivan A. Canay, 2011. "A simple approach to quantile regression for panel data," Econometrics Journal, Royal Economic Society, vol. 14(3), pages 368-386, October.
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