Robust Linear Static Panel Data Models Using Ε-Contamination

CRREP working paper serie 2017-06

36 Pages Posted: 22 May 2018

See all articles by Badi H. Baltagi

Badi H. Baltagi

Syracuse University - Maxwell School of Citizenship and Public Affairs; IZA Institute of Labor Economics; Syracuse University - Center for Policy Research

Georges Bresson

ERMES (CNRS), Université Panthéon-Assas Paris II

Anoop Chaturvedi

University of Allahabad

Guy Lacroix

Université Laval - Département d'Économique; IZA Institute of Labor Economics

Multiple version iconThere are 2 versions of this paper

Date Written: August 01, 2017

Abstract

The paper develops a general Bayesian framework for robust linear static panel data models using ε-contamination. A two-step approach is employed to derive the conditional type-II maximum likelihood (ML-II) posterior distribution of the coeffcients and individual effects. The ML-II posterior densities are weighted averages of the Bayes estimator under a base prior and the data-dependent empirical Bayes estimator. Two-stage and three stage hierarchy estimators are developed and their finite sample performance is investigated through a series of Monte Carlo experiments. These include standard random effects as well as Mundlak-type, Chamberlain-type and Hausman-Taylor-type models. The simulation results underscore the relatively good performance of the three-stage hierarchy estimator. Within a single theoretical framework, our Bayesian approach encompasses a variety of specifications while conventional methods require separate estimators for each case.

Keywords: ε-contamination, hyper g-priors, type-II maximum likelihood posterior density, panel data, robust Bayesian estimator, three-stage hierarchy

JEL Classification: C11, C23, C26

Suggested Citation

Baltagi, Badi H. and Bresson, Georges and Chaturvedi, Anoop and Lacroix, Guy, Robust Linear Static Panel Data Models Using Ε-Contamination (August 01, 2017). CRREP working paper serie 2017-06, Available at SSRN: https://ssrn.com/abstract=3175324 or http://dx.doi.org/10.2139/ssrn.3175324

Badi H. Baltagi (Contact Author)

Syracuse University - Maxwell School of Citizenship and Public Affairs ( email )

400 Eggers Hall
Syracuse, NY 13244
United States

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

Syracuse University - Center for Policy Research ( email )

Syracuse, NY 13244
United States
315-443-1630 (Phone)
315-443-1081 (Fax)

HOME PAGE: http://www.maxwell.syr.edu/cpr_about.aspx?id=6442451316

Georges Bresson

ERMES (CNRS), Université Panthéon-Assas Paris II ( email )

12 Place du Panthéon
Paris, Cedex 5, 75005
France

Anoop Chaturvedi

University of Allahabad ( email )

Department of Economics
University of Allahabad
Allahabad, PA 211002
India

Guy Lacroix

Université Laval - Département d'Économique ( email )

2325 Rue de l'Université
Ste-Foy, Quebec G1K 7P4 G1K 7P4
Canada
418-656-2024 (Phone)
418-656-7798 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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