Common Correlated Effects Estimation of Heterogeneous: Dynamic Panel Quantile Regression Models

98 Pages Posted: 10 Sep 2018 Last revised: 13 Dec 2018

See all articles by Matthew Harding

Matthew Harding

University of California, Irvine

Carlos Lamarche

University of Kentucky

M. Hashem Pesaran

University of Southern California - Department of Economics; University of Cambridge - Trinity College (Cambridge)

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Date Written: August 14, 2018

Abstract

This paper proposes a quantile regression estimator for a heterogeneous panel model with lagged dependent variables and interactive effects. The paper adopts the Common Correlated Effects (CCE) approach proposed by Pesaran (2006) and Chudik and Pesaran (2015) and demonstrates that the extension to the estimation of dynamic quantile regression models is feasible under similar conditions to the ones used in the literature. We establish consistency and derive the asymptotic distribution of the new quantile regression estimator. Monte Carlo studies are carried out to study the small sample behavior of the proposed approach. The evidence shows that the estimator can significantly improve on the performance of existing estimators as long as the time series dimension of the panel is large. We present an application to the evaluation of Time-of-Use pricing using a large randomized control trial.

Keywords: Common Correlated Effects, Dynamic Panel, Quantile Regression, Smart Meter, Randomized Experiment

JEL Classification: C21, C31, C33, D12, L94

Suggested Citation

Harding, Matthew and Lamarche, Carlos and Pesaran, M. Hashem, Common Correlated Effects Estimation of Heterogeneous: Dynamic Panel Quantile Regression Models (August 14, 2018). USC-INET Research Paper No. 18-11, Available at SSRN: https://ssrn.com/abstract=3242269 or http://dx.doi.org/10.2139/ssrn.3242269

Matthew Harding (Contact Author)

University of California, Irvine ( email )

Campus Drive
Irvine, CA 62697-3125
United States

Carlos Lamarche

University of Kentucky ( email )

Lexington, KY 40506
United States

HOME PAGE: http://gattonweb.uky.edu/Faculty/lamarche/

M. Hashem Pesaran

University of Southern California - Department of Economics

3620 South Vermont Ave. Kaprielian (KAP) Hall 300
Los Angeles, CA 90089
United States

University of Cambridge - Trinity College (Cambridge) ( email )

United Kingdom

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