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Semiparametric Efficient Estimation of AR(1) Panel Data Models

  • Byeong Park

    (Seoul National University)

  • Robin C. Sickles

    (Rice University)

  • Leopold Simar

    (Universite Catholique de Louvain)

This study focuses on the semiparametric efficient estimation of random effect panel models containing AR(1) disturbances. We also consider such estimators when the effects and regressors are correlated (Hausman and Taylor, 1981). One motivation for such a model is the need to estimate a stochastic frontier distance function, isolate the fixed effects estimates, and interpret transformations of them as firm-specific relative efficiencies (Schmidt and Sickles, 1984). In markets in which regulatory constraints have been lessened or done away with, these market shocks may not be adjusted to immediately and may induce a serial correlation pattern in within firm variations. In the banking industry, whose productivity we analyze over the 1980's and 1990's, these aspects of semiparametric efficient estimation become important in order to resolve questions concerning the proper measurement of financial deregulation's impact on productivity. We introduce two semiparametric efficient estimators that make minimal assumptions on the distribution of the random errors, effects, and the regressors and that provide semiparametric efficient estimates of the slope parameters and of the effects. Our estimators extend the previous work of Park and Simar (1995), Park, Sickles, and Simar (1998), and Adams, Berger, and Sickles (1998).

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Paper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 1510.

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Date of creation: 01 Aug 2000
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Handle: RePEc:ecm:wc2000:1510
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  1. J. A. Hausman & W. E. Taylor, 1980. "Panel Data and Unobservable Individual Effects," Working papers 255, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Cornwell, Christopher & Schmidt, Peter & Sickles, Robin C., 1989. "Production Frontiers With Cross-Sectinal And Time-Series Variation In Efficiency Levels," Working Papers 89-18, C.V. Starr Center for Applied Economics, New York University.
  3. Horowitz, Joel L & Markatou, Marianthi, 1996. "Semiparametric Estimation of Regression Models for Panel Data," Review of Economic Studies, Wiley Blackwell, vol. 63(1), pages 145-68, January.
  4. Park, B. U. & Sickles, R. C. & Simar, L., 1998. "Stochastic panel frontiers: A semiparametric approach," Journal of Econometrics, Elsevier, vol. 84(2), pages 273-301, June.
  5. Dennis J. Fixler & Kimberly D. Zieschang, 1992. "User Costs, Shadow Prices, and the Real Output of Banks," NBER Chapters, in: Output Measurement in the Service Sectors, pages 219-243 National Bureau of Economic Research, Inc.
  6. P.A.V.B. Swamy & Jalal D. Akhavein & Stephen B. Taubman, 1994. "A general method of deriving the efficiencies of banks from a profit function," Finance and Economics Discussion Series 94-11, Board of Governors of the Federal Reserve System (U.S.).
  7. Park, B.U. & Simar, L., 1992. "Efficient Semiparametric Estimation in Stochastic Frontier Model," Papers 9201, Catholique de Louvain - Institut de statistique.
  8. Allen N. Berger & Anil K. Kashyap & Joseph Scalise, 1995. "The Transformation of the U.S. Banking Industry: What a Long, Strange Trip It's Been," Center for Financial Institutions Working Papers 96-06, Wharton School Center for Financial Institutions, University of Pennsylvania.
  9. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
  10. Hans M. Amman & David A. Kendrick, . "Computational Economics," Online economics textbooks, SUNY-Oswego, Department of Economics, number comp1.
  11. Chamberlain, Gary, 1987. "Asymptotic efficiency in estimation with conditional moment restrictions," Journal of Econometrics, Elsevier, vol. 34(3), pages 305-334, March.
  12. Kiefer, Nicholas M., 1980. "Estimation of fixed effect models for time series of cross-sections with arbitrary intertemporal covariance," Journal of Econometrics, Elsevier, vol. 14(2), pages 195-202, October.
  13. Joel L. Horowitz & Marianthi Markatou, 1993. "Semiparametric Estimation Of Regression Models For Panel Data," Econometrics 9309001, EconWPA.
  14. Adams, Robert M & Berger, Allen N & Sickles, Robin C, 1999. "Semiparametric Approaches to Stochastic Panel Frontiers with Applications in the Banking Industry," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(3), pages 349-58, July.
  15. So Im, Kyung & Ahn, Seung C. & Schmidt, Peter & Wooldridge, Jeffrey M., 1999. "Efficient estimation of panel data models with strictly exogenous explanatory variables," Journal of Econometrics, Elsevier, vol. 93(1), pages 177-201, November.
  16. Chamberlain, Gary, 1992. "Efficiency Bounds for Semiparametric Regression," Econometrica, Econometric Society, vol. 60(3), pages 567-96, May.
  17. Schmidt, Peter & Sickles, Robin C, 1984. "Production Frontiers and Panel Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 2(4), pages 367-74, October.
  18. Jeon, Byung M. & Brown, Bryan, 2001. "Efficient Semiparametric Estimation of Expectations in Dynamic Nonlinear Systems," Working Papers 2001-09, Rice University, Department of Economics.
  19. Jondrow, James & Knox Lovell, C. A. & Materov, Ivan S. & Schmidt, Peter, 1982. "On the estimation of technical inefficiency in the stochastic frontier production function model," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 233-238, August.
  20. PARK, Byeong & SICKLES, Robin & SIMAR, Léopold, 1993. "Stochastic Frontiers : A Semiparametric Approach," CORE Discussion Papers 1993057, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  21. Robinson, Peter M, 1988. "Root- N-Consistent Semiparametric Regression," Econometrica, Econometric Society, vol. 56(4), pages 931-54, July.
  22. Battese, George E. & Coelli, Tim J., 1988. "Prediction of firm-level technical efficiencies with a generalized frontier production function and panel data," Journal of Econometrics, Elsevier, vol. 38(3), pages 387-399, July.
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