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Which panel data estimator should I use?

Author

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  • W. Robert Reed
  • Haichun Ye

Abstract

This study employs Monte Carlo experiments to evaluate the performances of a number of common panel data estimators when serial correlation and cross-sectional dependence are both present. It focuses on fixed effects models with less than 100 cross-sectional units and between 10 and 25 time periods (such as are commonly employed in empirical growth studies). Estimator performance is compared on two dimensions: (i) root mean square error and (ii) accuracy of estimated confidence intervals. An innovation of our study is that our simulated panel data sets are designed to look like ‘real-world’ panel data. We find large differences in the performances of the respective estimators. Further, estimators that perform well on efficiency grounds may perform poorly when estimating confidence intervals and vice versa. Our experimental results form the basis for a set of estimator recommendations. These are applied to ‘out of sample’ simulated panel data sets and found to perform well.

Suggested Citation

  • W. Robert Reed & Haichun Ye, 2011. "Which panel data estimator should I use?," Applied Economics, Taylor & Francis Journals, vol. 43(8), pages 985-1000, January.
    • Handle: RePEc:taf:applec:v:43:y:2011:i:8:p:985-1000
    DOI: 10.1080/00036840802600087
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    1. Mantobaye Moundigbaye & William Rea & W. Robert Reed, 2016. "More Evidence On “Which Panel Data Estimator Should I Use?”," Working Papers in Economics 16/18, University of Canterbury, Department of Economics and Finance.
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    5. Moundigbaye, Mantobaye & Rea, William S. & Reed, W. Robert, 2018. "Which panel data estimator should I use? A corrigendum and extension," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy, vol. 12, pages 1-31.
    6. Mohammad Nazim Uddin & Mohammed Shamim Uddin Khan & Mosharrof Hosen, 2019. "Does Corporate Governance Influence Leverage Structure in Bangladesh?," IJFS, MDPI, vol. 7(3), pages 1-16, September.
    7. Bergh, Andreas & Nilsson, Therese, 2010. "Good for Living? On the Relationship between Globalization and Life Expectancy," World Development, Elsevier, vol. 38(9), pages 1191-1203, September.
    8. Bergh, Andreas & Nilsson, Therese, 2009. "Good for living? On the relation between globalization and life expectancy," Working Papers 2009:9, Lund University, Department of Economics.
    9. Zewdie Habte SHIKUR, 2022. "Development And Enterprises’ Labor Demand In Sub-Saharan Africa: Evidence From Panel Data Of Four Countries," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 22(2), pages 109-124.
    10. Aiman Sana & Farzana Naheed Khan & Umaima Arif, 2022. "ICT diffusion and climate change: The role of economic growth, financial development and trade openness," Netnomics, Springer, vol. 22(2), pages 179-194, October.
    11. Ibhagui, Oyakhilome, 2017. "How Does Foreign Direct Investment Affect Growth in Sub-Saharan Africa? New Evidence from Non-threshold and Threshold Analysis," MPRA Paper 85784, University Library of Munich, Germany.
    12. Akinwande A. Atanda & Andrea K. Menclova & W. Robert Reed, 2016. "Is Health Care Infected by Baumol’s Cost Disease? Test of a New Model Using an OECD Dataset," Working Papers in Economics 16/04, University of Canterbury, Department of Economics and Finance.
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    14. Aiman Sana & Farzana Naheed Khan & Umaima Arif, 2021. "ICT diffusion and climate change: The role of economic growth, financial development and trade openness," Netnomics, Springer, vol. 22(2), pages 179-194, December.
    15. Reed, W. Robert & Webb, Rachel S., 2011. "Estimating standard errors for the Parks model: Can jackknifing help?," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy, vol. 5, pages 1-14.
    16. Achyut Wagle, 2018. "Fiscal Imbalances in Nepal's Federalism : An Empirical Analysis," NRB Economic Review, Nepal Rastra Bank, Economic Research Department, vol. 30(1), pages 49-68, April.
    17. Rubeena Asghar & Sabeela Asghar & Hafsah Batool, 2021. "Position of Pakistani Basmati Rice in International Markets (A Comparative Analysis)," International Journal of Agriculture & Sustainable Development, 50sea, vol. 3(4), pages 94-98, December.
    18. Jose Caraballo†Cueto, 2016. "Is there a minimum wage biting in Puerto Rico? Updating the debate," Industrial Relations Journal, Wiley Blackwell, vol. 47(5-6), pages 513-529, November.
    19. Md Qamruzzaman & Sylvia Kor, 2024. "Navigating the path to environmental sustainability: Insights from CIVETS on the intersection of ICT diffusion, natural resources, and green technological innovation," PLOS ONE, Public Library of Science, vol. 19(12), pages 1-40, December.
    20. Ali, Wajid & Saini, Seema & Dash, Devi Prasad, 2026. "Institutional governance and energy security: Unveiling the drivers of global value chain participation in Asian economies," Journal of Asian Economics, Elsevier, vol. 103(C).
    21. Dr. Ameenullah Aman & Dr. Usman Ahmad & Sumera Muhammad Saleem, 2021. "Investigating the Link Between Macroeconomic Factors and Income Inequality of Asian Countries," iRASD Journal of Economics, International Research Alliance for Sustainable Development (iRASD), vol. 3(3), pages 376-387, December.
    22. Helder Ferreira de Mendonça & Igor da Silva Veiga, 2017. "The open economy trilemma in Latin America: A three-decade analysis," International Finance, Wiley Blackwell, vol. 20(2), pages 135-154, June.
    23. Włodarczyk, Aneta & Szczepańska-Woszczyna, Katarzyna & Urbański, Mariusz, 2024. "Carbon and financial performance nexus of the heavily polluting companies in the context of resource management during COVID-19 period," Resources Policy, Elsevier, vol. 89(C).

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