Lecture Structure • Rationale for Panel Models
• Construction of one-way and two-way error components models
• Hypothesis tests
• Extensions
Panel Models
• What can we learn from datasets with many individuals but few time periods?
• Can we construct regression models based on panel datasets?
• What advantages do panel estimators have over estimates based on cross-sections alone?
Unobserved Heterogeneity
• Omitted variables bias
• Many individual characteristics are not observed
– e.g. enthusiasm, willingness to take risks
• These vary across individuals – described as unobserved heterogeneityTheoretical Insights
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