A one-stage random effect counterpart of the fixed-effect vector decomposition model with anapplication to UK electricity distribution utilities
To deal with the presence of slowly changing variables, Plümper and Troeger (2007) proposed a fixed effects vector decomposition (FEVD) estimator, which is a three-stage procedure based on the fixed effects estimator. We show that this estimator moves between fixed effect and ordinary least squar...
| Main Authors: | , , |
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| Format: | Working Paper |
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University of Oviedo
2011
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| Online Access: | https://www.unioviedo.es/oeg/ESP/esp_2011_01.pdf http://hdl.handle.net/20.500.11937/22266 |
| _version_ | 1848750822382370816 |
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| author | Greene, William Orea, L. Wall, A. |
| author_facet | Greene, William Orea, L. Wall, A. |
| author_sort | Greene, William |
| building | Curtin Institutional Repository |
| collection | Online Access |
| description | To deal with the presence of slowly changing variables, Plümper and Troeger (2007) proposed a fixed effects vector decomposition (FEVD) estimator, which is a three-stage procedure based on the fixed effects estimator. We show that this estimator moves between fixed effect and ordinary least squares depending on how its second stage is specified. This provides an alternative interpretation of the FEVD estimator that allows us to introduce a one-stage counterpart of the FEVD model, which can be viewed as a partial Mundlak (1978) transformation of the random effects model. We illustrate our approach with an application to UK electricity distribution utilities using the same data as Yu et al. (2009). Our application suggests that our estimator and the FEVD yield similar results when the pooled OLS estimates for a given panel are similar to the random effects estimates. |
| first_indexed | 2025-11-14T07:42:56Z |
| format | Working Paper |
| id | curtin-20.500.11937-22266 |
| institution | Curtin University Malaysia |
| institution_category | Local University |
| last_indexed | 2025-11-14T07:42:56Z |
| publishDate | 2011 |
| publisher | University of Oviedo |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | curtin-20.500.11937-222662017-08-15T05:25:34Z A one-stage random effect counterpart of the fixed-effect vector decomposition model with anapplication to UK electricity distribution utilities Greene, William Orea, L. Wall, A. fixed effects vector decomposition one-stage estimator slowly changing variables To deal with the presence of slowly changing variables, Plümper and Troeger (2007) proposed a fixed effects vector decomposition (FEVD) estimator, which is a three-stage procedure based on the fixed effects estimator. We show that this estimator moves between fixed effect and ordinary least squares depending on how its second stage is specified. This provides an alternative interpretation of the FEVD estimator that allows us to introduce a one-stage counterpart of the FEVD model, which can be viewed as a partial Mundlak (1978) transformation of the random effects model. We illustrate our approach with an application to UK electricity distribution utilities using the same data as Yu et al. (2009). Our application suggests that our estimator and the FEVD yield similar results when the pooled OLS estimates for a given panel are similar to the random effects estimates. 2011 Working Paper http://hdl.handle.net/20.500.11937/22266 https://www.unioviedo.es/oeg/ESP/esp_2011_01.pdf University of Oviedo restricted |
| spellingShingle | fixed effects vector decomposition one-stage estimator slowly changing variables Greene, William Orea, L. Wall, A. A one-stage random effect counterpart of the fixed-effect vector decomposition model with anapplication to UK electricity distribution utilities |
| title | A one-stage random effect counterpart of the fixed-effect vector decomposition model with anapplication to UK electricity distribution utilities |
| title_full | A one-stage random effect counterpart of the fixed-effect vector decomposition model with anapplication to UK electricity distribution utilities |
| title_fullStr | A one-stage random effect counterpart of the fixed-effect vector decomposition model with anapplication to UK electricity distribution utilities |
| title_full_unstemmed | A one-stage random effect counterpart of the fixed-effect vector decomposition model with anapplication to UK electricity distribution utilities |
| title_short | A one-stage random effect counterpart of the fixed-effect vector decomposition model with anapplication to UK electricity distribution utilities |
| title_sort | one-stage random effect counterpart of the fixed-effect vector decomposition model with anapplication to uk electricity distribution utilities |
| topic | fixed effects vector decomposition one-stage estimator slowly changing variables |
| url | https://www.unioviedo.es/oeg/ESP/esp_2011_01.pdf http://hdl.handle.net/20.500.11937/22266 |