Econometrica

Journal Of The Econometric Society

An International Society for the Advancement of Economic
Theory in its Relation to Statistics and Mathematics

Edited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262

Econometrica: Sep, 2012, Volume 80, Issue 5

Identification and Estimation of Average Partial Effects in “Irregular” Correlated Random Coefficient Panel Data Models

https://doi.org/10.3982/ECTA8220
p. 2105-2152

Bryan S. Graham, James L. Powell

In this paper we study identification and estimation of a correlated random coefficients (CRC) panel data model. The outcome of interest varies linearly with a vector of endogenous regressors. The coefficients on these regressors are heterogenous across units and may covary with them. We consider the average partial effect (APE) of a small change in the regressor vector on the outcome (cf. Chamberlain (1984), Wooldridge (2005a)). Chamberlain (1992) calculated the semiparametric efficiency bound for the APE in our model and proposed a √‐consistent estimator. Nonsingularity of the APE's information bound, and hence the appropriateness of Chamberlain's (1992) estimator, requires (i) the time dimension of the panel () to strictly exceed the number of random coefficients () and (ii) strong conditions on the time series properties of the regressor vector. We demonstrate irregular identification of the APE when  =  and for more persistent regressor processes. Our approach exploits the different identifying content of the subpopulations of —or units whose regressor values change little across periods—and —or units whose regressor values change substantially across periods. We propose a feasible estimator based on our identification result and characterize its large sample properties. While irregularity precludes our estimator from attaining parametric rates of convergence, its limiting distribution is normal and inference is straightforward to conduct. Standard software may be used to compute point estimates and standard errors. We use our methods to estimate the average elasticity of calorie consumption with respect to total outlay for a sample of poor Nicaraguan households.


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Supplemental Material

Supplement to "Identification and Estimation of Average Partial Effects in 'Irregular' Correlated Random Coefficient Panel Data Models"

This file contains the replication files for the manuscript.

Supplement to "Identification and Estimation of Average Partial Effects in 'Irregular' Correlated Random Coefficient Panel Data Models"

This supplement contains proofs of some auxiliary Lemmas used to show Theorem 2.1. It also contains a proof of Theorem 2.2 and additional details regarding the empirical application. All notation is as established in the main paper unless noted otherwise.  Equation numbering continues in sequence with that established in the main paper.  References not included in the bibliography to the main paper are listed as well.

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