Department of Economics and Business Economics

Generalized dynamic panel data models with random effects for cross-section and time

Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaperJournal articleResearchpeer-review

  • G. Mesters, Netherlands Institute for the Study of Crime and Law Enforcement, Unknown
  • S. J. Koopman

An exact maximum likelihood method is developed for the estimation of parameters in a nonlinear non-Gaussian dynamic panel data model with unobserved random individual-specific and time-varying effects. We propose an estimation procedure based on the importance sampling technique. In particular, a sequence of conditional importance densities is derived which integrates out all random effects from the joint distribution of endogenous variables. We disentangle the integration over both the cross-section and the time series dimensions. The estimation method facilitates the modeling of large panels in both dimensions. We evaluate the method in an extended Monte Carlo study for dynamic panel data models with observations from different non-Gaussian distributions. We finally present three empirical illustrations for (i) union choice of young males using a Binary panel, (ii) crime rates of families using a Binomial panel and (iii) economic growth modeling using a Student's t panel.

Original languageEnglish
JournalJournal of Econometrics
Volume180
Issue2
Pages (from-to)127-140
Number of pages14
ISSN0304-4076
DOIs
Publication statusPublished - 1 Jan 2014

    Research areas

  • Dynamic panel data, Importance sampling, Non-Gaussian, Random effects

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