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Varying Coefficient Panel Data Model in the Presence of Endogenous Selectivity and Fixed Effects

Author

Listed:
  • Malikov, Emir
  • Kumbhakar, Subal C.
  • Sun, Yiguo

Abstract

This paper considers a flexible panel data sample selection model in which (i) the outcome equation is permitted to take a semiparametric, varying coefficient form to capture potential parameter heterogeneity in the relationship of interest, (ii) both the outcome and (parametric) selection equations contain unobserved fixed effects and (iii) selection is generalized to a polychotomous case. We propose a two-stage estimator. Given consistent parameter estimates from the selection equation obtained in the first stage, we estimate the semiparametric outcome equation using data for the observed individuals whose likelihood of being selected into the sample stays approximately the same over time. The selection bias term is then "asymptotically" removed from the equation along with fixed effects using kernel-based weights. The proposed estimator is consistent and asymptotically normal. We first investigate the finite sample properties of the estimator in a small Monte Carlo study and then apply it to study production technologies of U.S. retail credit unions from 2002 to 2006.

Suggested Citation

  • Malikov, Emir & Kumbhakar, Subal C. & Sun, Yiguo, 2013. "Varying Coefficient Panel Data Model in the Presence of Endogenous Selectivity and Fixed Effects," MPRA Paper 55993, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:55993
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    1. is not listed on IDEAS
    2. Malikov, Emir & Hartarska, Valentina, 2018. "Endogenous scope economies in microfinance institutions," Journal of Banking & Finance, Elsevier, vol. 93(C), pages 162-182.
    3. Zheng Li & Guannan Liu & Qi Li, 2017. "Nonparametric Knn estimation with monotone constraints," Econometric Reviews, Taylor & Francis Journals, vol. 36(6-9), pages 988-1006, October.
    4. repec:ags:aaea22:343758 is not listed on IDEAS
    5. Chirok Han & Goeun Lee, 2017. "Efficient Estimation of Linear Panel Data Models with Sample Selection and Fixed Effects," Discussion Paper Series 1707, Institute of Economic Research, Korea University.
    6. Feng, Guohua & Gao, Jiti & Peng, Bin, 2022. "An integrated panel data approach to modelling economic growth," Journal of Econometrics, Elsevier, vol. 228(2), pages 379-397.
    7. Emir Malikov & Diego A. Restrepo-Tobón & Subal C. Kumbhakar, 2018. "Heterogeneous credit union production technologies with endogenous switching and correlated effects," Econometric Reviews, Taylor & Francis Journals, vol. 37(10), pages 1095-1119, November.
    8. Halder, Shaymal C. & Malikov, Emir, 2020. "Smoothed LSDV estimation of functional-coefficient panel data models with two-way fixed effects," Economics Letters, Elsevier, vol. 192(C).
    9. Sun, Yiguo & Malikov, Emir, 2018. "Estimation and inference in functional-coefficient spatial autoregressive panel data models with fixed effects," Journal of Econometrics, Elsevier, vol. 203(2), pages 359-378.
    10. Zhang, Jingfang & Malikov, Emir & Miao, Ruiqing & Ghosh, Prasenjit N., 2024. "Geography of Climate Change Adaptation in U.S. Agriculture: Evidence from Spatially Varying Long-Differences Approach," 2024 Annual Meeting, July 28-30, New Orleans, LA 343758, Agricultural and Applied Economics Association.
    11. Feng, Sanying & He, Wenqi & Li, Feng, 2020. "Model detection and estimation for varying coefficient panel data models with fixed effects," Computational Statistics & Data Analysis, Elsevier, vol. 152(C).

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    Keywords

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    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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