A Estimate The Above Model Using Pooled Ols Interpret Your Results When Would This Estimation Strategy Be Justified 1 (37.24 KiB) Viewed 19 times
a. Estimate the above model using pooled OLS. Interpret your results. When would this estimation strategy be justified? Check for multicollinearity using variance inflation factor (vif). What do you conclude? b. Estimate the same model using the Random Effects (RE) estimator. Are Random Effects justified? c. Next, estimate the same model using the Fixed Effects (FE) estimator. d. Conduct a Hausman test to compare the Fixed Effects (FE) and Random Effects (RE) models. What do you conclude? e. Test for heteroskedasticity for the Fixed Effect (FE) model. What do you conclude? f. Test for serial correlation using xtserial command. What do you conclude? g. Perform an estimation that can rectify the above (e) and (f) problem(s), and present the result in the last column. Results of Panel Data Analysis Debendent Variable: In PRI Heteroskedasticity and Serial Correlation tests, which are p-values. ∗ and ∗ - indicate the respective 5% and 1% significance levels.
Greene (1997) provides a small panel data set with information on costs and output of 6 different firms, in 4 different periods of time (1955,1960,1965, and 1970). Your job is to estimate a cost function using basic panel data techniques. Data File: Firm.xIs The data is shown below in a stacked form, i.e., the first "T" lines (here T=4 ) regard the fim 1 , then the second "T" lines regard firm 2, and so on. The columns are self-explanatory. To facilitate your work, I included firm specific dummy variables for each firm, represented by columns D1-D6. Empirical Model In Costit =04+β In Outputit + Lit t Estimate the above model: a. Pooled OLS b. Fixed Effect c. Random Effect d. What should I use: Fixed Effects or Random Effects? e. LSDV. Can we impose common intercept for all firms? f. Test whether the time-effects are needed in the model.
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