Determination of different types of fixed effects in three-dimensional panels

• Main Authors: LU, Xun, MIAO, Ke, SU, Liangjun
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2018
• Subjects: Consistency; Cross-validation; Fixed effect; Individual effect; Jackknife; Three-dimensional panel.; Econometrics
• Online Access: https://ink.library.smu.edu.sg/soe_research/2186; https://ink.library.smu.edu.sg/context/soe_research/article/3185/viewcontent/3D_determination_of_fixed_effects20180423B_.pdf
• Institution: Singapore Management University

In this paper we propose a jackknife method to determine the type of fixed effects in three-dimensional panel data models. We show that with probability approaching 1, the method can select the correct type of fixed effects in the presence of only weak serial or cross-sectional dependence among the error terms. In the presence of strong serial correlation, we propose a modified jackknife method and justify its selection consistency. Monte Carlo simulations demonstrate the excellent finite sample performance of our method. Applications to two datasets in macroeconomics and international trade reveal the usefulness of our method.