Analysis of Panel Data for Continuous Dependent Variables

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Abstract
This chapter discusses estimation methods for panel data where the dependent variable is continuous. It shows how to estimate pooled models and how to account for individual unobserved heterogeneity; how to compute different types of standard errors, linear and non-linear tests for model selection; and how to obtain predictions, residuals, etc. The techniques are illustrated using as examples wage equations estimated using BHPS data for the period 1991-2008. The most important characteristic of panel data is that we have repeated observations per individual. Following individuals over time allows us to better disentangle causality and to better control for unobserved individual heterogeneity (that is, differences across individuals that do not change over time and which are not ...

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