SSE/EFI Working Paper Series in Economics and Finance
No 433:
Specification and estimation of random effects models with serial correlation of general form
Jimmy Skoglund ()
and Sune Karlsson ()
Abstract: This paper is concerned with maximum likelihood based
inference in random effects models with serial correlation. Allowing for
individual effects we introduce serial correlation of general form in the
time effects as well as the idiosyncratic errors. A straightforward maximum
likelihood estimator is derived and a coherent model selection strategy is
suggested for determining the orders of serial correlation as well as the
importance of time and individual effects. The methods are applied to the
estimation of a production function for the Japanese chemical industry
using a sample of 72 firms observed during 1968-1987. Empirically, our
focus is on measuring the returns to scale and technical change for the
industry.
Keywords: Panel data; serial correlation; random effects; (follow links to similar papers)
JEL-Codes: C12; C13; C23; (follow links to similar papers)
25 pages, February 13, 2001
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