Abstract

We propose a two-step procedure to estimate a heterogeneous dynamic panel data model with interactive fixed effects. We establish the asymptotic properties of the estimators and show that the final estimator is oracle efficient. We also propose a specification test for the null hypothesis of homogeneous slopes and study the asymptotic properties of the test statistic under both local and global alternatives. Simulations demonstrate the fine performance of the estimator and test statistic. The new estimation and inference methods are applied to study the heterogeneous effects of minimum wage on employment across different counties in the United States. Our dynamic model suggests that the changes of employment range from about –1% to 1% when the minimum wage increases by 1%.

Full Text
Published version (Free)

Talk to us

Join us for a 30 min session where you can share your feedback and ask us any queries you have

Schedule a call