Bayesian Estimation of Panel Models under Potentially Sparse Heterogeneity
Econometrics
2024-02-07 v2
Abstract
We incorporate a version of a spike and slab prior, comprising a pointmass at zero ("spike") and a Normal distribution around zero ("slab") into a dynamic panel data framework to model coefficient heterogeneity. In addition to homogeneity and full heterogeneity, our specification can also capture sparse heterogeneity, that is, there is a core group of units that share common parameters and a set of deviators with idiosyncratic parameters. We fit a model with unobserved components to income data from the Panel Study of Income Dynamics. We find evidence for sparse heterogeneity for balanced panels composed of individuals with long employment histories.
Cite
@article{arxiv.2310.13785,
title = {Bayesian Estimation of Panel Models under Potentially Sparse Heterogeneity},
author = {Hyungsik Roger Moon and Frank Schorfheide and Boyuan Zhang},
journal= {arXiv preprint arXiv:2310.13785},
year = {2024}
}