Identifying Reduced-Form Relations with Panel Data

Tinbergen Institute Discussion Paper No. 07-072/3

65 Pages Posted: 18 Sep 2007

See all articles by Herman R.J. Vollebergh

Herman R.J. Vollebergh

PBL Netherlands Environmental Assessment Agency (Bilthoven); Tilburg Unversity ; CESifo Institute; Tilburg Sustainability Centre; Tilburg University - Tilburg University School of Economics and Management

Elbert Dijkgraaf

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); Erasmus University Rotterdam, SEOR-ECRi

Bertrand Melenberg

Tilburg University - Center for Economic Research (CentER)

Date Written: September 13, 2007

Abstract

The literature that tests for U-shaped relationships using panel data, such as those between pollution and income or inequality and growth, reports widely divergent (parametric and non-parametric) empirical findings. We explain why lack of identification lies at the root of these differences. To deal with this lack of identification, we propose an identification strategy that explicitly distinguishes between what can be identified on the basis of the data and what is a consequence of subjective choices due to a lack of identification. We apply our methodology to the pollution-income relationship of both CO2- and SO2-emissions. Interestingly, our approach yields estimates of both income (scale) and time (composition and/or technology) effects for these reduced-form relationships that are insensitive to the required subjective choices and consistent with theoretical predictions.

Keywords: Identification, Panel Data, Reduced-Form (Semi-)Parametric Estimation, Emission-Income Relationships

JEL Classification: C33, O50, Q40

Suggested Citation

Vollebergh, Herman R.J. and Dijkgraaf, Elbert and Melenberg, Bertrand, Identifying Reduced-Form Relations with Panel Data (September 13, 2007). Tinbergen Institute Discussion Paper No. 07-072/3, Available at SSRN: https://ssrn.com/abstract=1015229 or http://dx.doi.org/10.2139/ssrn.1015229

Herman R.J. Vollebergh (Contact Author)

PBL Netherlands Environmental Assessment Agency (Bilthoven) ( email )

Bezuidenhoutseweg 30
Den Haag, 2594 AV
Netherlands
+31655736920 (Phone)

Tilburg Unversity ( email )

Tilburg
Netherlands

HOME PAGE: http://www.tilburguniversity.edu/webwijs/show/h.r.j.vollebergh.htm

CESifo Institute ( email )

Munich
Germany

Tilburg Sustainability Centre ( email )

P.O. Box 90153
Tilburg, North Brabant 5000 LE
Netherlands

Tilburg University - Tilburg University School of Economics and Management ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Elbert Dijkgraaf

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Erasmus University Rotterdam, SEOR-ECRi ( email )

P.O. Box 1738
H 7-34
Rotterdam, 3000 DR
Netherlands
+31 10 4082590 (Phone)
+31 10 4089650 (Fax)

HOME PAGE: http://www.ecri.nl

Bertrand Melenberg

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2730 (Phone)

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