Thursday, March 09, 2006

Re: st: TSCS: what model for N>T ??

Joel Miller wrote:

> I´ve been working on TSCS data involving 41 police force areas, and about > 7 > time periods (soon I hope to be 8). I´m theoretically interested in a > fixed > effects model, because I want to see how variation within police forces is > impacting arrest rates over time (and Hausman tests suggest a fixed > effects > model is appropriate). > > However, is OLS fixed effects my only choice here? I have played a little > with a panel adjusted standard error (the Beck and Katz model). But while > I > have seen published articles which use the PCSE model with a similar data > structure to mine (N a lot greater than T), I have since been advised that > this is not appropriate. This puzzles me a little, because I have also > read > further that the Beck/Katz is actually more suited to N>T than other > approaches. > > In short I´m confused. Help!

Directly from Beck (2001: 274):

"...TSCS methods are justified by asymptotics in T and typically require a reasonably large T to be useful. ... (T)here is no hard and fast minimum T for TSCS methods for work, but one ought to be suspicious of TSCS methods used for, say, T < 10. On the other hand, TSCS methods do not require a large a large N, although a large N is typically not harmful. ... (P)anel methods are designed for and work with very small Ts (three, perhaps even two) but require a large N for the theoretical properties of the estimators to have any practical consequences."

Since this comes from the doyen of applying TSCS models to political/social data, my recommendation would be to run -xtpcse- models on your data anyway, but present and interpret them with huge caveats.

CLIVE NICHOLAS |t: 0(044)7903 397793 Politics |e: clive.nicholas@ncl.ac.uk Newcastle University |http://www.ncl.ac.uk/geps

Reference:

Beck N (2001) "Time-Series Cross Section Data: What Have We Learned in the Past Few Years", ANNUAL REVIEW OF POLITICAL SCIENCE 4: 271-93.

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