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Journal of Econometric Methods

Ed. by Giacomini, Raffaella / Li, Tong

Mathematical Citation Quotient (MCQ) 2018: 0.06

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Estimation of Panel Data Models with Parameter Heterogeneity when Group Membership is Unknown

Chang-Ching Lin / Serena Ng
Published Online: 2012-08-24 | DOI: https://doi.org/10.1515/2156-6674.1000


This paper proposes two methods for estimating panel data models with group specific parameters when group membership is not known. The first method uses the individual level time series estimates of the parameters to form threshold variables. The problem of parameter heterogeneity is turned into estimation of a panel threshold model with an unknown threshold value. The second method modifies the K-means algorithm to perform conditional clustering. Units are clustered based on the deviations between the individual and the group conditional means. The two approaches are used to analyze growth across countries and housing market dynamics across the states in the U.S.

This article offers supplementary material which is provided at the end of the article.

Keywords: threshold models; cluster analysis; convergence clubs; regional housing

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Published Online: 2012-08-24

Citation Information: Journal of Econometric Methods, Volume 1, Issue 1, Pages 42–55, ISSN (Online) 2156-6674, DOI: https://doi.org/10.1515/2156-6674.1000.

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