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Chow Tests of Structural Change

Panel Data

Summary

Quantitative Microeconomics

R. Mora

Department of Economics

Universidad Carlos III de Madrid

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

Outline

Panel Data

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

there are also time series: each observation represents a

separate period

we may also have cross sections for dierent time periods

(pooled cross-sections)

and we may also have panel data

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

there are also time series: each observation represents a

separate period

we may also have cross sections for dierent time periods

(pooled cross-sections)

and we may also have panel data

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

there are also time series: each observation represents a

separate period

we may also have cross sections for dierent time periods

(pooled cross-sections)

and we may also have panel data

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

there are also time series: each observation represents a

separate period

we may also have cross sections for dierent time periods

(pooled cross-sections)

and we may also have panel data

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

there are also time series: each observation represents a

separate period

we may also have cross sections for dierent time periods

(pooled cross-sections)

and we may also have panel data

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

there are also time series: each observation represents a

separate period

we may also have cross sections for dierent time periods

(pooled cross-sections)

and we may also have panel data

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

CIS surveys

each month independently, the Centro de Investigaciones

Sociolgicas samples the Spanish population

the surveys ask for political and sociological actitudes

individuals interviewed in one month are not interviewed in any

other month

data with this structure are known as pooled cross-sections

they are cross-sections, but you may study time eects

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

CIS surveys

each month independently, the Centro de Investigaciones

Sociolgicas samples the Spanish population

the surveys ask for political and sociological actitudes

individuals interviewed in one month are not interviewed in any

other month

data with this structure are known as pooled cross-sections

they are cross-sections, but you may study time eects

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

CIS surveys

each month independently, the Centro de Investigaciones

Sociolgicas samples the Spanish population

the surveys ask for political and sociological actitudes

individuals interviewed in one month are not interviewed in any

other month

data with this structure are known as pooled cross-sections

they are cross-sections, but you may study time eects

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

CIS surveys

each month independently, the Centro de Investigaciones

Sociolgicas samples the Spanish population

the surveys ask for political and sociological actitudes

individuals interviewed in one month are not interviewed in any

other month

data with this structure are known as pooled cross-sections

they are cross-sections, but you may study time eects

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

ECHP 19942001

each year, the European Community Household Panel surveys

the same individuals on a wide range of topics: income, health,

education, housing, employment, etc

in the rst wave, i.e. in 1994, approximately 130,000 adults

aged 16 years and over

least two periods

panel data is also referred to as longitudinal data

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

ECHP 19942001

each year, the European Community Household Panel surveys

the same individuals on a wide range of topics: income, health,

education, housing, employment, etc

in the rst wave, i.e. in 1994, approximately 130,000 adults

aged 16 years and over

least two periods

panel data is also referred to as longitudinal data

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

ECHP 19942001

each year, the European Community Household Panel surveys

the same individuals on a wide range of topics: income, health,

education, housing, employment, etc

in the rst wave, i.e. in 1994, approximately 130,000 adults

aged 16 years and over

least two periods

panel data is also referred to as longitudinal data

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

ECHP 19942001

each year, the European Community Household Panel surveys

the same individuals on a wide range of topics: income, health,

education, housing, employment, etc

in the rst wave, i.e. in 1994, approximately 130,000 adults

aged 16 years and over

least two periods

panel data is also referred to as longitudinal data

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

we may want to pool cross sections just to get bigger samples

we may want to capture time eects

suppose we assume that parameters remain constant

wages

it = 0 + 1 educ it + uit

the parameters of the model

to do so, we need to make assumptions about the value of the

parameters in each period

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

we may want to pool cross sections just to get bigger samples

we may want to capture time eects

suppose we assume that parameters remain constant

wages

it = 0 + 1 educ it + uit

the parameters of the model

to do so, we need to make assumptions about the value of the

parameters in each period

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

we may want to pool cross sections just to get bigger samples

we may want to capture time eects

suppose we assume that parameters remain constant

wages

it = 0 + 1 educ it + uit

the parameters of the model

to do so, we need to make assumptions about the value of the

parameters in each period

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

we may want to pool cross sections just to get bigger samples

we may want to capture time eects

suppose we assume that parameters remain constant

wages

it = 0 + 1 educ it + uit

the parameters of the model

to do so, we need to make assumptions about the value of the

parameters in each period

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

we may want to pool cross sections just to get bigger samples

we may want to capture time eects

suppose we assume that parameters remain constant

wages

it = 0 + 1 educ it + uit

the parameters of the model

to do so, we need to make assumptions about the value of the

parameters in each period

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

the simplest model assumes that only the intercept changes

wages

it = 0t + 1 educ it + uit

where t

= 1, ..., T

for changes in the units of measurement of the dependent

variable across periods

this eectively controls for annual ination in a wage

regression model if wages are nominal wages

in general, it captures time changes in the denition of the

dependent variable which aect all observations equally

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

the simplest model assumes that only the intercept changes

wages

it = 0t + 1 educ it + uit

where t

= 1, ..., T

for changes in the units of measurement of the dependent

variable across periods

this eectively controls for annual ination in a wage

regression model if wages are nominal wages

in general, it captures time changes in the denition of the

dependent variable which aect all observations equally

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

the simplest model assumes that only the intercept changes

wages

it = 0t + 1 educ it + uit

where t

= 1, ..., T

for changes in the units of measurement of the dependent

variable across periods

this eectively controls for annual ination in a wage

regression model if wages are nominal wages

in general, it captures time changes in the denition of the

dependent variable which aect all observations equally

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

the simplest model assumes that only the intercept changes

wages

it = 0t + 1 educ it + uit

where t

= 1, ..., T

for changes in the units of measurement of the dependent

variable across periods

this eectively controls for annual ination in a wage

regression model if wages are nominal wages

in general, it captures time changes in the denition of the

dependent variable which aect all observations equally

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

we can investigate whether relations change in time

wages

it = 0 + 1t educ it + uit

where t=1,...,T

we have as many slopes for education as time periods

an alternative presentation of the same model

wages

1T educit 1(t = T ) + uit

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

we can investigate whether relations change in time

wages

it = 0 + 1t educ it + uit

where t=1,...,T

we have as many slopes for education as time periods

an alternative presentation of the same model

wages

1T educit 1(t = T ) + uit

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

we can investigate whether relations change in time

wages

it = 0 + 1t educ it + uit

where t=1,...,T

we have as many slopes for education as time periods

an alternative presentation of the same model

wages

1T educit 1(t = T ) + uit

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

we can investigate whether relations change in time

wages

it = 0 + 1t educ it + uit

where t=1,...,T

we have as many slopes for education as time periods

an alternative presentation of the same model

wages

1T educit 1(t = T ) + uit

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

for simplicity, assume two periods (T

wages

= 2)

12 educit 1(t = 2) + uit

Step 1: generate T interactions with educ

=

educ 2 =

genr educ 1

genr

(year == 1)

educ (year == 2)

educ

with T

= 3,

it

robust

= 4,

four, ...

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

for simplicity, assume two periods (T

wages

= 2)

12 educit 1(t = 2) + uit

Step 1: generate T interactions with educ

=

educ 2 =

genr educ 1

genr

(year == 1)

educ (year == 2)

educ

with T

= 3,

it

robust

= 4,

four, ...

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

for simplicity, assume two periods (T

wages

= 2)

12 educit 1(t = 2) + uit

Step 1: generate T interactions with educ

=

educ 2 =

genr educ 1

genr

(year == 1)

educ (year == 2)

educ

with T

= 3,

it

robust

= 4,

four, ...

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

for simplicity, assume two periods (T

wages

= 2)

12 educit 1(t = 2) + uit

Step 1: generate T interactions with educ

=

educ 2 =

genr educ 1

genr

(year == 1)

educ (year == 2)

educ

with T

= 3,

it

robust

= 4,

four, ...

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

for simplicity, assume two periods (T

wages

= 2)

12 educit 1(t = 2) + uit

Step 1: generate T interactions with educ

=

educ 2 =

genr educ 1

genr

(year == 1)

educ (year == 2)

educ

with T

= 3,

it

robust

= 4,

four, ...

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

for simplicity, assume two periods (T

wages

= 2)

12 educit 1(t = 2) + uit

Step 1: generate T interactions with educ

=

educ 2 =

genr educ 1

genr

(year == 1)

educ (year == 2)

educ

with T

= 3,

it

robust

= 4,

four, ...

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

for simplicity, assume two periods (T

wages

= 2)

12 educit 1(t = 2) + uit

Step 1: generate T interactions with educ

=

educ 2 =

genr educ 1

genr

(year == 1)

educ (year == 2)

educ

with T

= 3,

it

robust

= 4,

four, ...

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

wages

change in the returns to education

H0

: 12 = 11 H0 :12 11 = 0

= 1) = 1 1(t = 2)

wages

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

wages

change in the returns to education

H0

: 12 = 11 H0 :12 11 = 0

= 1) = 1 1(t = 2)

wages

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

wages

change in the returns to education

H0

: 12 = 11 H0 :12 11 = 0

= 1) = 1 1(t = 2)

wages

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

wages

change in the returns to education

H0

: 12 = 11 H0 :12 11 = 0

= 1) = 1 1(t = 2)

wages

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

wages

change in the returns to education

H0

: 12 = 11 H0 :12 11 = 0

= 1) = 1 1(t = 2)

wages

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

wages

change in the returns to education

H0

: 12 = 11 H0 :12 11 = 0

= 1) = 1 1(t = 2)

wages

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

H0

Step 1: generate T

:12 11 = 0

interactions

(year == 2)

Step 2

ols wages const educ educ 2

robust

diers from the slope of the rst year

we can choose the reference year at will

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

H0

Step 1: generate T

:12 11 = 0

interactions

(year == 2)

Step 2

ols wages const educ educ 2

robust

diers from the slope of the rst year

we can choose the reference year at will

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

H0

Step 1: generate T

:12 11 = 0

interactions

(year == 2)

Step 2

ols wages const educ educ 2

robust

diers from the slope of the rst year

we can choose the reference year at will

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

H0

Step 1: generate T

:12 11 = 0

interactions

(year == 2)

Step 2

ols wages const educ educ 2

robust

diers from the slope of the rst year

we can choose the reference year at will

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

H0

Step 1: generate T

:12 11 = 0

interactions

(year == 2)

Step 2

ols wages const educ educ 2

robust

diers from the slope of the rst year

we can choose the reference year at will

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

H0

Step 1: generate T

:12 11 = 0

interactions

(year == 2)

Step 2

ols wages const educ educ 2

robust

diers from the slope of the rst year

we can choose the reference year at will

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

Independent Regressions

What happens if we allow for parameter time variation in all years?

wages

it = 0t + 1t educ it + uit

the standard deviation estimated with a sample of NT

observations

for the slopes, it is exactly like estimating all periods separately

for inference, it is dierent if we assume a constant error

variance in the pooled estimation

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

Independent Regressions

What happens if we allow for parameter time variation in all years?

wages

it = 0t + 1t educ it + uit

the standard deviation estimated with a sample of NT

observations

for the slopes, it is exactly like estimating all periods separately

for inference, it is dierent if we assume a constant error

variance in the pooled estimation

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

Independent Regressions

What happens if we allow for parameter time variation in all years?

wages

it = 0t + 1t educ it + uit

the standard deviation estimated with a sample of NT

observations

for the slopes, it is exactly like estimating all periods separately

for inference, it is dierent if we assume a constant error

variance in the pooled estimation

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

Independent Regressions

What happens if we allow for parameter time variation in all years?

wages

it = 0t + 1t educ it + uit

the standard deviation estimated with a sample of NT

observations

for the slopes, it is exactly like estimating all periods separately

for inference, it is dierent if we assume a constant error

variance in the pooled estimation

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

Independent Regressions

What happens if we allow for parameter time variation in all years?

wages

it = 0t + 1t educ it + uit

the standard deviation estimated with a sample of NT

observations

for the slopes, it is exactly like estimating all periods separately

for inference, it is dierent if we assume a constant error

variance in the pooled estimation

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

Independent Regressions

What happens if we allow for parameter time variation in all years?

wages

it = 0t + 1t educ it + uit

the standard deviation estimated with a sample of NT

observations

for the slopes, it is exactly like estimating all periods separately

for inference, it is dierent if we assume a constant error

variance in the pooled estimation

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

wages

it = 0t + 1t educit + uit

H0

= 1, 2

: 01 = 02 , 11 = 12

slopes or in the constant

changes in the constant sometimes only capture dierences in

the measurement of the dependent variable

in these cases it seems more interesting to test only structural

change in the slopes

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

wages

it = 0t + 1t educit + uit

H0

= 1, 2

: 01 = 02 , 11 = 12

slopes or in the constant

changes in the constant sometimes only capture dierences in

the measurement of the dependent variable

in these cases it seems more interesting to test only structural

change in the slopes

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

wages

it = 0t + 1t educit + uit

H0

= 1, 2

: 01 = 02 , 11 = 12

slopes or in the constant

changes in the constant sometimes only capture dierences in

the measurement of the dependent variable

in these cases it seems more interesting to test only structural

change in the slopes

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

wages

it = 0t + 1t educit + uit

H0

= 1, 2

: 01 = 02 , 11 = 12

slopes or in the constant

changes in the constant sometimes only capture dierences in

the measurement of the dependent variable

in these cases it seems more interesting to test only structural

change in the slopes

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

wages

it = 0t + 1t educit + uit

H0

= 1, 2

: 01 = 02 , 11 = 12

slopes or in the constant

changes in the constant sometimes only capture dierences in

the measurement of the dependent variable

in these cases it seems more interesting to test only structural

change in the slopes

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

wages

it = 0t + 1t educit + uit

H0

= 1, 2

: 01 = 02 , 11 = 12

slopes or in the constant

changes in the constant sometimes only capture dierences in

the measurement of the dependent variable

in these cases it seems more interesting to test only structural

change in the slopes

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

wages

it = 0t + 1t educit + uit

H0

= 1, 2

: 01 = 02 , 11 = 12

slopes or in the constant

changes in the constant sometimes only capture dierences in

the measurement of the dependent variable

in these cases it seems more interesting to test only structural

change in the slopes

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

wages

it = 0t + 1t educit + uit

H0

= 1, 2

: 11 = 12

simultaneously

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

wages

it = 0t + 1t educit + uit

H0

= 1, 2

: 11 = 12

simultaneously

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

wages

it = 0t + 1t educit + uit

H0

= 1, 2

: 11 = 12

simultaneously

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

wages

it = 0t + 1t educit + uit

H0

= 1, 2

: 11 = 12

simultaneously

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

panel data can be used to address more potential problems than

pooled cross-sections

ai is not observed and is individual specic

for example, assume that ai captures the combined

wages

eect of

it

represents unobservable time-invariant individual variation

(heterogeneity)

individuals are esentially dierent, and that is partly why they

make dierent choices

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

panel data can be used to address more potential problems than

pooled cross-sections

ai is not observed and is individual specic

for example, assume that ai captures the combined

wages

eect of

it

represents unobservable time-invariant individual variation

(heterogeneity)

individuals are esentially dierent, and that is partly why they

make dierent choices

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

panel data can be used to address more potential problems than

pooled cross-sections

ai is not observed and is individual specic

for example, assume that ai captures the combined

wages

eect of

it

represents unobservable time-invariant individual variation

(heterogeneity)

individuals are esentially dierent, and that is partly why they

make dierent choices

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

panel data can be used to address more potential problems than

pooled cross-sections

ai is not observed and is individual specic

for example, assume that ai captures the combined

wages

eect of

it

represents unobservable time-invariant individual variation

(heterogeneity)

individuals are esentially dierent, and that is partly why they

make dierent choices

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

panel data can be used to address more potential problems than

pooled cross-sections

ai is not observed and is individual specic

for example, assume that ai captures the combined

wages

eect of

it

represents unobservable time-invariant individual variation

(heterogeneity)

individuals are esentially dierent, and that is partly why they

make dierent choices

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

panel data can be used to address more potential problems than

pooled cross-sections

ai is not observed and is individual specic

for example, assume that ai captures the combined

wages

eect of

it

represents unobservable time-invariant individual variation

(heterogeneity)

individuals are esentially dierent, and that is partly why they

make dierent choices

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

panel data can be used to address more potential problems than

pooled cross-sections

ai is not observed and is individual specic

for example, assume that ai captures the combined

wages

eect of

it

represents unobservable time-invariant individual variation

(heterogeneity)

individuals are esentially dierent, and that is partly why they

make dierent choices

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

wages

ols wages const exper exper 2

i , exper it ) 6= 0

if cov (a

robust

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

wages

ols wages const exper exper 2

i , exper it ) 6= 0

if cov (a

robust

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

wages

ols wages const exper exper 2

i , exper it ) 6= 0

if cov (a

robust

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

wages

ols wages const exper exper 2

i , exper it ) 6= 0

if cov (a

robust

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

wages

=2

this is referred to as taking rst dierences:

by taking rst dierences, we get rid of a

if cov (u

it , xit ) = 0

consistent

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

wages

=2

this is referred to as taking rst dierences:

by taking rst dierences, we get rid of a

if cov (u

it , xit ) = 0

consistent

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

wages

=2

this is referred to as taking rst dierences:

by taking rst dierences, we get rid of a

if cov (u

it , xit ) = 0

consistent

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

wages

=2

this is referred to as taking rst dierences:

by taking rst dierences, we get rid of a

if cov (u

it , xit ) = 0

consistent

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

wages

=2

this is referred to as taking rst dierences:

by taking rst dierences, we get rid of a

if cov (u

it , xit ) = 0

consistent

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

wages

=2

this is referred to as taking rst dierences:

by taking rst dierences, we get rid of a

if cov (u

it , xit ) = 0

consistent

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

wages

=2

this is referred to as taking rst dierences:

by taking rst dierences, we get rid of a

if cov (u

it , xit ) = 0

consistent

R. Mora

Modelling Time Eects in Cross-Sections

Chow Tests of Structural Change

Panel Data

Summary

Summary

to test time eects

it is very easy to test structural changes in pooled cross

sections

with panel data we can do everything we do with pooled

cross-sections

in addition, we can also obtain OLS estimates which are robust

to unobservable heterogeneity

R. Mora

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