A0755
Title: Estimation and inference of panel data models with a generalized factor structure
Authors: Juan Manuel Rodriguez-Poo - Universidad de Cantabria (Spain) [presenting]
Alexandra Soberon - Universidad de Cantabria (Spain)
Stefan Sperlich - University of Geneva (Switzerland)
Abstract: The focus is on the identification, inference, and validation of a linear panel data model where the unobserved heterogeneity is controlled through a nonparametric function. This general specification encompasses rather popular models such as the two-way fixed effects and the interactive fixed effects. By applying a conditional mean independence assumption between unobserved heterogeneity and the covariates, consistent estimators of the parameters of interest are provided at the optimal rate of convergence, for fixed and large $T$. A consistent specification test is also provided for the crucial modeling assumption based on the methodology of conditional moment tests and nonparametric estimation techniques. Using degenerate and nondegenerate theories of U-statistics, its convergence and asymptotic distribution under the null are shown, and that it diverges under the alternative at a rate arbitrarily close to $\sqrt{NT}$. Finite sample inference is based on bootstrap. Simulations reveal an excellent performance of the methods, and an empirical application is conducted.
