Publication Type

Working Paper

Publication Date

11-2016

Abstract

In this paper, we propose a single-index panel data model with unobserved multiple interactive fixed effects. This model has the advantages of being flexible and of being able to allow for common shocks and their heterogeneous impacts on cross sections, thus making it suitable for the investigation of many economic issues. We derive asymptotic theories for both the case where the link function is integrable and the case where the link function is non-integrable. Our Monte Carlo simulations show that our methodology works well for large N and T cases. In our empirical application, we illustrate our model by analyzing the returns to scale of large commercial banks in the U.S. Our empirical results suggest that the vast majority of U.S. large banks exhibit increasing returns to scale.

Keywords

Asymptotic theory; Nonlinear panel data model; Interactive fixed effects; Orthogonal series expansion method

Discipline

Econometrics

Research Areas

Econometrics

First Page

1

Last Page

71

Identifier

10.2139/ssrn.2865294

Publisher

SSRN

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Additional URL

http://doi.org/10.2139/ssrn.2865294

Included in

Econometrics Commons

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