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Common Correlated Effects Estimation of Heterogeneous Dynamic Panel Quantile Regression Models

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  • Matthew Harding
  • Carlos Lamarche
  • M. Hashem Pesaran

Abstract

This paper proposes a quantile regression estimator for a heterogeneous panel model with lagged dependent variables and interactive effects. The paper adopts the Common Correlated Effects (CCE) approach proposed by Pesaran (2006) and Chudik and Pesaran (2015) and demonstrates that the extension to the estimation of dynamic quantile regression models is feasible under similar conditions to the ones used in the literature. We establish consistency and derive the asymptotic distribution of the new quantile regression estimator. Monte Carlo studies are carried out to study the small sample behavior of the proposed approach. The evidence shows that the estimator can significantly improve on the performance of existing estimators as long as the time series dimension of the panel is large. We present an application to the evaluation of Time-of-Use pricing using a large randomized control trial.

Suggested Citation

  • Matthew Harding & Carlos Lamarche & M. Hashem Pesaran, 2018. "Common Correlated Effects Estimation of Heterogeneous Dynamic Panel Quantile Regression Models," CESifo Working Paper Series 7211, CESifo.
    • Handle: RePEc:ces:ceswps:_7211
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    References listed on IDEAS

    as
    1. Galvao Jr., Antonio F., 2011. "Quantile regression for dynamic panel data with fixed effects," Journal of Econometrics, Elsevier, vol. 164(1), pages 142-157, September.
    2. Chudik, Alexander & Pesaran, M. Hashem, 2015. "Common correlated effects estimation of heterogeneous dynamic panel data models with weakly exogenous regressors," Journal of Econometrics, Elsevier, vol. 188(2), pages 393-420.
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    Keywords

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    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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