UCL Department of Economics


Cemmap seminar presented by Louise Laage (Toulouse)

22 October 2019, 12:30 pm–1:30 pm

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A Panel Random Coefficient Model with Time-varying Endogeneity

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Open to

UCL staff | UCL students


Daniel Wilhelm

This paper studies a class of linear panel models with random coefficients. We do not restrict the joint distribution of the time-invariant unobserved heterogeneity and the covariates. We investigate identification of the average partial effect (APE) when fixed-effect techniques cannot be used to control for the correlation between the regressors and the time-varying disturbances. Relying on control variables, we develop a constructive two-step identification argument. The first step identifies nonparametrically the conditional expectation of the disturbances given the regressors and the control variables, and the second step uses “between-group” variations, correcting for endogeneity, to identify the APE. We propose a natural semiparametric estimator of the APE, show its /n asymptotic normality and compute its asymptotic variance. The estimator is computationally easy to implement, and Monte Carlo simulations show favorable finite sample properties. Control variables arise in various economic and econometric models, and we provide variations of our argument to obtain identification in some applications. As an empirical illustration, we estimate the average elasticity of intertemporal substitution in a labor supply model with random coefficients.

The full paper can be found

About the Speaker

Louise Laage

at Toulouse

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