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Stationary Errors and Quantile Regression in Short Panels

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  • Shakeeb Khan
  • Elie Tamer

Abstract

This paper studies a linear panel model with an unrestricted individual effect and a time- stationary idiosyncratic disturbance. We first show that stationarity is a strong restriction in a quantile model. In a linear conditional quantile specification with quantile-dependent slopes, equality of the conditional residual distributions across periods generically forces the slope coefficient to be constant over the quantile index. Thus, a stationary-error model identifies a common location coefficient rather than a collection of quantile-specific slope effects. We then develop a fixed-T estimator of this common coefficient. For each period, we run a cross- sectional quantile regression of the outcome on the full history of regressors. Stationarity makes the quantile projection of the composite individual effect and disturbance common across the period-specific regressions. Differences between diagonal and off-diagonal blocks of the resulting projection coefficients therefore identify the common slope whenever T>=2. We combine all such restrictions by a two-step minimum-distance estimator. The estimator is root-n-consistent and asymptotically normal with fixed T, permits unrestricted dependence across periods within an individual, and does not estimate the individual effects. We provide a consistent analytic covariance estimator, a cluster bootstrap, and an overidentification test of the projection restrictions implied by stationarity. Extensive Monte Carlo experiments show adequate performance under various designs.

Suggested Citation

  • Shakeeb Khan & Elie Tamer, 2026. "Stationary Errors and Quantile Regression in Short Panels," Papers 2608.08750, arXiv.org.
  • Handle: RePEc:arx:papers:2608.08750
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    References listed on IDEAS

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    1. Galvao, Antonio F. & Gu, Jiaying & Volgushev, Stanislav, 2020. "On the unbiased asymptotic normality of quantile regression with fixed effects," Journal of Econometrics, Elsevier, vol. 218(1), pages 178-215.
    2. Galvao, Antonio F. & Wang, Liang, 2015. "Efficient minimum distance estimator for quantile regression fixed effects panel data," Journal of Multivariate Analysis, Elsevier, vol. 133(C), pages 1-26.
    3. 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.
    4. 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, March.
    5. Chen, Songnian & Wang, Xi, 2018. "Semiparametric estimation of panel data models without monotonicity or separability," Journal of Econometrics, Elsevier, vol. 206(2), pages 515-530.
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