Abstract
This paper investigates a class of penalized quantile regression estimators for panel data. The penalty serves to shrink a vector of individual specific effects toward a common value. The degree of this shrinkage is controlled by a tuning parameter λ . It is shown that the class of estimators is asymptotically unbiased and Gaussian, when the individual effects are drawn from a class of zero-median distribution functions. The tuning parameter, λ , can thus be selected to minimize estimated asymptotic variance. Monte Carlo evidence reveals that the estimator can significantly reduce the variability of the fixed-effect version of the estimator without introducing bias.
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