Abstract
We study kmeans clustering estimation of panel data models with a latent group structure and N units and T time periods under long panel asymptotics. We show that the group-specific coefficients can be estimated at the parametric NT-rate even if error variances diverge as T→∞ and consequently some units are asymptotically misclassified. This limit case approximates empirically relevant settings and is not covered by existing asymptotic results.
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