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The Two-Way Error Component Regression Model

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Econometric Analysis of Panel Data

Part of the book series: Springer Texts in Business and Economics ((STBE))

Abstract

This chapter studies the two-way error component regression model which controls for individual as well as time effects. This includes the fixed and random effects specification. It also discusses maximum likelihood estimation under normality and best linear unbiased prediction. It illustrates these methods with three empirical examples. The first is an investment equation using panel data on firms. The second is a gasoline demand equation using panel data of OECD countries. The third example estimates the productivity of public capital in the private sector using panel data on 48 contiguous states. These are illustrated using Stata and EViews.

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Authors and Affiliations

  1. Department of Economics and The Center for Policy Research, Syracuse University, Syracuse, NY, USA

    Badi H. Baltagi

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  1. Badi H. Baltagi
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Correspondence to Badi H. Baltagi .

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Baltagi, B.H. (2021). The Two-Way Error Component Regression Model. In: Econometric Analysis of Panel Data. Springer Texts in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-030-53953-5_3

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