Quant II 1 & 2 Regression with Panel Data
Quant II 1 & 2
Regression with Panel Data
Evidence Based Research
: improve resource allocation (educating women reduces fertility rate)
policy outcome evaluation and political sustainability (giving money to the poor ensures their education and health. program continued despite being previous government's idea)
Colombia malnourishment & cognitive:
improve policy design, assessing alternative
Kenya deworming, uniform, meal, school attendance:
evaluate cost-effectiveness of several methods
Mexico happy cement floor:
To research or not?
Types of Impact Assessment
how intervention can change outcome
comparing what's happening and what should be happening
tells what's happening
To at least be able to tell between good and bad analysis
Time Fixed Effects
Same over location, time-invariant variable
Entity Fixed Effects
Same over time, entity-invariant variable
Read 10.6 at Page 418
One variable must be fixed. Unfortunately panel data is often unavailable.
For varying time and entities, Instrumental Variables Regression is used.
Previous Prob with OLS:
Omitted Variable Bias (OVB)
Wrong functional form
Balanced panel has all observation for each entity and each time period.
This method can be used for unbalanced data in certain regression software.
To produce a rigorous
Theories of Change
is basis for Hypothesis Testing
Control unobservable variables
Vary time, fixed location: automobile safety innovation
Fixed time, vary location: drinking culture
"Before & After"
By assuming that an OLS is fixed in time, using After - Before formula will remove the OLS from the equation.
Only applies when Time = 2. If there are more time data, use Fixed Effects Regression.
Fixed Effects Regression
Fixed time, vary location
As growth increase, public wages as a share of GDP will decrease
Assumption of Regression Analysis
Sample is IID (Independent Identical Distribution)
Expected value of error = 0
No outlier, can check thru scatterplot