Change point estimation in panel data with time-varying individual effects

Otilia Boldea, Bettina Drepper, Zhuojiong Gan*

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

Abstract

Existing panel data methods remove unobserved individual effects before change point estimation through data transformations such as first-differencing. In this paper, we show that multiple change points can be consistently estimated in short panels via ordinary least squares. Since no data variation is removed before change point estimation, our method has better small-sample properties compared to first-differencing methods. We also propose two tests that identify whether the change points found by our method originate in the slope parameters or in the covariance of the regressors with individual effects. We illustrate our method via modeling the environmental Kuznets curve and the US house price expectations after the financial crisis.
Original languageEnglish
JournalJournal of Applied Econometrics
DOIs
Publication statusE-pub ahead of print - Apr 2020

Keywords

  • DATA MODELS
  • HETEROGENEOUS PANELS
  • INFERENCE
  • SERIES
  • HEALTH
  • BREAKS

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