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Book part
Publication date: 19 December 2012

Shahram Amini, Michael S. Delgado, Daniel J. Henderson and Christopher F. Parmeter

Hausman (1978) represented a tectonic shift in inference related to the specification of econometric models. The seminal insight that one could compare two models which…

Abstract

Hausman (1978) represented a tectonic shift in inference related to the specification of econometric models. The seminal insight that one could compare two models which were both consistent under the null spawned a test which was both simple and powerful. The so-called ‘Hausman test’ has been applied and extended theoretically in a variety of econometric domains. This paper discusses the basic Hausman test and its development within econometric panel data settings since its publication. We focus on the construction of the Hausman test in a variety of panel data settings, and in particular, the recent adaptation of the Hausman test to semiparametric and nonparametric panel data models. We present simulation experiments which show the value of the Hausman test in a nonparametric setting, focusing primarily on the consequences of parametric model misspecification for the Hausman test procedure. A formal application of the Hausman test is also given focusing on testing between fixed and random effects within a panel data model of gasoline demand.

Details

Essays in Honor of Jerry Hausman
Type: Book
ISBN: 978-1-78190-308-7

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Book part
Publication date: 21 December 2010

Saleem Shaik and Ashok K. Mishra

In this chapter, we utilize the residual concept of productivity measures defined in the context of normal-gamma stochastic frontier production model with heterogeneity to…

Abstract

In this chapter, we utilize the residual concept of productivity measures defined in the context of normal-gamma stochastic frontier production model with heterogeneity to differentiate productivity and inefficiency measures. In particular, three alternative two-way random effects panel estimators of normal-gamma stochastic frontier model are proposed using simulated maximum likelihood estimation techniques. For the three alternative panel estimators, we use a generalized least squares procedure involving the estimation of variance components in the first stage and estimated variance–covariance matrix to transform the data. Empirical estimates indicate difference in the parameter coefficients of gamma distribution, production function, and heterogeneity function variables between pooled and the two alternative panel estimators. The difference between pooled and panel model suggests the need to account for spatial, temporal, and within residual variations as in Swamy–Arora estimator, and within residual variation in Amemiya estimator with panel framework. Finally, results from this study indicate that short- and long-run variations in financial exposure (solvency, liquidity, and efficiency) play an important role in explaining the variance of inefficiency and productivity.

Details

Maximum Simulated Likelihood Methods and Applications
Type: Book
ISBN: 978-0-85724-150-4

Book part
Publication date: 12 December 2003

Badi H. Baltagi, Georges Bresson and Alain Pirotte

In the spirit of White’s (1982) paper, this paper examines the consequences of model misspecification using a panel data regression model. Maximum likelihood, random and…

Abstract

In the spirit of White’s (1982) paper, this paper examines the consequences of model misspecification using a panel data regression model. Maximum likelihood, random and fixed effects estimators are compared using Monte Carlo experiments under normality of the disturbances but with a possibly misspecified variance-covariance matrix. We show that the correct GLS (ML) procedure is always the best according to MSE performance, but the researcher does not have perfect foresight on the true form of the variance covariance matrix. In this case, we show that a pretest estimator is a viable alternative given that its performance is a close second to correct GLS (ML) whether the true specification is a two-way, a one-way error component model or a pooled regression model. Incorrect GLS, ML or fixed effects estimators may lead to a big loss in MSE.

Details

Maximum Likelihood Estimation of Misspecified Models: Twenty Years Later
Type: Book
ISBN: 978-1-84950-253-5

Book part
Publication date: 6 August 2014

Kenneth Y. Chay and Dean R. Hyslop

We examine the roles of sample initial conditions and unobserved individual effects in consistent estimation of the dynamic binary response panel data model. Different…

Abstract

We examine the roles of sample initial conditions and unobserved individual effects in consistent estimation of the dynamic binary response panel data model. Different specifications of the model are estimated using female welfare and labor force participation data from the Survey of Income and Program Participation. These include alternative random effects (RE) models, in which the conditional distributions of both the unobserved heterogeneity and the initial conditions are specified, and fixed effects (FE) conditional logit models that make no assumptions on either distribution. There are several findings. First, the hypothesis that the sample initial conditions are exogenous is rejected by both samples. Misspecification of the initial conditions results in drastically overstated estimates of the state dependence and understated estimates of the short- and long-run effects of children on labor force participation. The FE conditional logit estimates are similar to the estimates from the RE model that is flexible with respect to both the initial conditions and the correlation between the unobserved heterogeneity and the covariates. For female labor force participation, there is evidence that fertility choices are correlated with both unobserved heterogeneity and pre-sample participation histories.

Book part
Publication date: 30 August 2019

Bai Huang, Tae-Hwy Lee and Aman Ullah

This chapter examines the asymptotic properties of the Stein-type shrinkage combined (averaging) estimation of panel data models. We introduce a combined estimation when…

Abstract

This chapter examines the asymptotic properties of the Stein-type shrinkage combined (averaging) estimation of panel data models. We introduce a combined estimation when the fixed effects (FE) estimator is inconsistent due to endogeneity arising from the correlated common effects in the regression error and regressors. In this case, the FE estimator and the CCEP estimator of Pesaran (2006) are combined. This can be viewed as the panel data model version of the shrinkage to combine the OLS and 2SLS estimators as the CCEP estimator is a 2SLS or control function estimator that controls for the endogeneity arising from the correlated common effects. The asymptotic theory, Monte Carlo simulation, and empirical applications are presented. According to our calculation of the asymptotic risk, the Stein-like shrinkage estimator is more efficient estimation than the CCEP estimator.

Details

Topics in Identification, Limited Dependent Variables, Partial Observability, Experimentation, and Flexible Modeling: Part A
Type: Book
ISBN: 978-1-78973-241-2

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Book part
Publication date: 16 December 2009

Yiguo Sun, Raymond J. Carroll and Dingding Li

We consider the problem of estimating a varying coefficient panel data model with fixed-effects (FE) using a local linear regression approach. Unlike first-differenced…

Abstract

We consider the problem of estimating a varying coefficient panel data model with fixed-effects (FE) using a local linear regression approach. Unlike first-differenced estimator, our proposed estimator removes FE using kernel-based weights. This results a one-step estimator without using the backfitting technique. The computed estimator is shown to be asymptotically normally distributed. A modified least-squared cross-validatory method is used to select the optimal bandwidth automatically. Moreover, we propose a test statistic for testing the null hypothesis of a random-effects varying coefficient panel data model against an FE one. Monte Carlo simulations show that our proposed estimator and test statistic have satisfactory finite sample performance.

Details

Nonparametric Econometric Methods
Type: Book
ISBN: 978-1-84950-624-3

Book part
Publication date: 2 March 2011

Luiz Paulo Lopes Fávero and Fernando Barreira Sotelino

While differences in stock price behaviours among developed countries have been extensively researched and documented, investigations of this nature for emerging economies…

Abstract

While differences in stock price behaviours among developed countries have been extensively researched and documented, investigations of this nature for emerging economies are, however, much less comprehensive. We undertake a quantitative analysis that investigates six different types of panel data models to define the best one that explains the stock price behaviour of publicly traded companies in emerging countries. The research is based on a sample from Compustat Global, including 5,167 stocks of companies from 38 emerging countries, covering 119 months (1998–2007), totalling 235,621 observations. This analysis of the elasticities of regressors corresponding to stock transactions in stock markets, through a considerable sample, contributes to a deeper discussion about stock price behaviour in countries with less developed stock markets. The findings demonstrate that stock quantity and total volume traded per month significantly influence closing price behaviour over time, with more efficient estimators for the fixed effect model. Moreover, different elasticities are verified among countries. This chapter does not take into account the macroeconomic reasons why the differences among countries occur. Further, the consideration of developed countries, such as United States, United Kingdom, France or Australia, could bring the possibility of comparison of stock prices among countries in a broader perspective. Overall this analysis can help governments and private initiative for the formulation and implementation of strategic actions, in order to constantly improve the quality of their stock markets and, consequently, to increase the entry of resources destined to the development of nations.

Details

The Impact of the Global Financial Crisis on Emerging Financial Markets
Type: Book
ISBN: 978-0-85724-754-4

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Article
Publication date: 1 April 2014

Bassem Kahouli and Samir Maktouf

– This paper aims to use the approach based on the application of the law of gravity for the study of the flows of export and the effects of the RTAs.

Abstract

Purpose

This paper aims to use the approach based on the application of the law of gravity for the study of the flows of export and the effects of the RTAs.

Design/methodology/approach

In this paper, the authors evaluate the effects of RTAs on exports between members and non-members taking into account the Vinerian specification. The authors also try to estimate the impact of the recent economic crisis on the flows of export and the success of the RTAs. The authors use a model of static and dynamic gravity for 40 countries and six RTAs during the period 1980-2011.

Findings

Definitely the proliferation of RTAs will continue to be one of the driving forces that will constitute the political system and the global economy in the following years. It indicates a process that implies the merger of economies separated in bigger regions of free trade. Regional integration is seen as beneficial in many senses and is the major economic objectives in addition to presenting a stabilizing factor in international relations.

Originality/value

The gravity model is estimated using the last techniques of panel data which takes into account the endogeneity of the effects of integration and the existence of dynamic effect.

Details

International Journal of Development Issues, vol. 13 no. 1
Type: Research Article
ISSN: 1446-8956

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Book part
Publication date: 23 May 2005

Anabela Botelho, Glenn W. Harrison, Marc A. Hirsch and Elisabet E. Rutström

Field experiments have raised important issues of interpretation of bargaining behavior. There is evidence that bargaining behavior appears to vary across groups of…

Abstract

Field experiments have raised important issues of interpretation of bargaining behavior. There is evidence that bargaining behavior appears to vary across groups of populations, such as nationality, ethnicity and sex. Differences have been observed with respect to initial behavior and with respect to the adjustment pattern over time. Often, such behavioral differences are referred to as cultural, although the delineation of the cultural group has been confined to one or other observable characteristic in isolation. We show that this way of characterizing cultural differences is overly simplistic: at best, it leads to unreliable claims; at worst, it leads to erroneous conclusions. We reconsider the evidence provided by previous experiments using ultimatum game rules, and undertake new experiments that expand the controls for demographics. The lesson from our demonstration is that the task of designing experiments for the field offers many challenges if one wants to define and control for cultural impacts, but that field experiments also offer potential for providing new insights into these issues.

Details

Field Experiments in Economics
Type: Book
ISBN: 978-0-76231-174-3

Article
Publication date: 10 July 2021

Leonita Braha-Vokshi, Gadaf Rexhepi, Veland Ramadani, Hyrije Abazi-Alili and Arshian Sharif

The purpose of this study is to investigate the impact on income distribution from foreign investment and open trade. The research highlights the impact of multinational…

Abstract

Purpose

The purpose of this study is to investigate the impact on income distribution from foreign investment and open trade. The research highlights the impact of multinational enterprises (MNEs) on inequality in Western Balkan (WB) countries from 2007 to 2019. The study seeks to answer a critical question: how do multinational corporations affect income distribution?

Design/methodology/approach

The study uses different techniques such as two-stage least squared, fixed and random effect estimators and generalised method of moments (GMM). The data was gathered from the United Nations Development Programme, World Bank Indicators (WB) and Slot’s World Standardised Income Inequality Database.

Findings

The interaction of multinational companies through foreign direct investment (FDI) has a significant impact on income inequality. This research paper indicates that the effect of FDI on income inequality is significant and has a negative effect on income inequality within WB countries. The results from the GMM estimator, therefore, demonstrate the hypothesis that multinational companies have a positive effect in WBs countries on reducing inequality.

Originality/value

The theoretical contribution that this paper seeks to make is by the applying of incremental changing dimension or more specifically, through expanding existing knowledge. Based on a study of the prior articles, the authors found out that the majority of the papers discussed only income inequality or economic inequality or rarely education, but none of the papers examined all classifications of inequality in one paper. This paper’s second contribution is to calculate inequality not only by the Gini coefficient but also by the human development index. The study is unique in that it is the first to assess the impact of FDI on income distribution in WB countries. The research is unique in that it attempts to shed light on the impact of multinational corporations on inequality in Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia and Serbia. The findings of this study will help to develop new policies, new legislation, reducing inequity and support FDIs and MNEs for governments and policymakers.

Details

Review of International Business and Strategy, vol. 32 no. 2
Type: Research Article
ISSN: 2059-6014

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