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Another Look at what to do with Time-series Cross-section Data

Our study revisits Beck and Katz' (1995) comparison of the Parks and PCSE estimators using time-series, cross-sectional data (TSCS). Our innovation is that we construct simulated statistical environments that are designed to approximate actual TSCS data. We pattern our statistical environments after income and tax data on U.S. states from 1960-1999. While PCSE generally does a better job than Parks in estimating standard errors/confidence intervals, it too can be unreliable, sometimes producing standard errors/confidence intervals that are substantially off the mark. Further, we find that the benefits of PCSE can come at a large cost in estimator efficiency.

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Paper provided by University of Canterbury, Department of Economics and Finance in its series Working Papers in Economics with number 06/04.

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Length: 32 pages
Date of creation: 31 Mar 2006
Date of revision:
Handle: RePEc:cbt:econwp:06/04
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  1. Woojin Lee & John E. Roemer, 2005. "The Rise and Fall of Unionised Labour Markets: A Political Economy Approach," Economic Journal, Royal Economic Society, vol. 115(500), pages 28-67, 01.
  2. Brulhart, Marius & Trionfetti, Federico, 2004. "Public expenditure, international specialisation and agglomeration," European Economic Review, Elsevier, vol. 48(4), pages 851-881, August.
  3. Kristian Jönsson, 2005. "Cross-sectional Dependency and Size Distortion in a Small-sample Homogeneous Panel Data Unit Root Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 67(3), pages 369-392, 06.
  4. Joseph DeJuan & Maria J. Luengo-Prado, 2005. "Consumption and Aggregate Constraints: International Evidence," Macroeconomics 0501018, EconWPA.
  5. Kwok Tong Soo, 2004. "Zipfs Law for Cities: A Cross Country Investigation," CEP Discussion Papers dp0641, Centre for Economic Performance, LSE.
  6. Reed, W. Robert, 2006. "Democrats, republicans, and taxes: Evidence that political parties matter," Journal of Public Economics, Elsevier, vol. 90(4-5), pages 725-750, May.
  7. Luca Nunziata, 2001. "Institutions and Wage Determination: a Multi-Country Approach," Economics Papers 2001-W29, Economics Group, Nuffield College, University of Oxford.
  8. Helms, L Jay, 1985. "The Effect of State and Local Taxes on Economic Growth: A Time Series-Cross Section Approach," The Review of Economics and Statistics, MIT Press, vol. 67(4), pages 574-82, November.
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