# 2.2 Panel data models  (Page 3/10)

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## Random-effects models

An alternative approach to treating the ${\alpha }_{i}$ in (1) as fixed constants over time is to treat it as a random variable. Returning to (1) where the intercepts vary due to individual level differences, we have ${y}_{it}={\alpha }_{i}+\sum _{j=1}^{k}{\beta }_{k}{x}_{kit}+{\epsilon }_{it}.$ Treating ${\alpha }_{i}$ as a random variable is equivalent to setting the model up as:

${y}_{it}=\alpha +\sum _{j=1}^{k}{\beta }_{j}{x}_{jit}+\left({\alpha }_{i}+{\lambda }_{t}+{\epsilon }_{it}\right).$

For simplicity we consider only the case when ${\lambda }_{t}=0.$ Thus, the error term for (11) is $\left({\alpha }_{i}+{\epsilon }_{it}\right).$ We assume that

We also assume that all of the elements of the error term are uncorrelated with the explanatory variables, ${x}_{j}.$

The key econometric issue is that the presence of ${\alpha }_{i}$ in the error term means that the correlation among the residual of the same cross-sectional unit is not zero; the error terms for one farm, for instance, are correlated with each other. Therefore, the error terms exhibit heteroskedasticity. The appropriate estimation technique is generalized-least-squares, a technique that attempts to adjust the parameter estimates (and their standard error estimates) for heteroskedasticity and autocorrelation. Alternatively one can assume that ${\alpha }_{i}$ and ${\epsilon }_{it}$ are normally distributed and use a ML estimator. Hsiao [2003: 35-41] and Cameron and Trivedi [2005: 699-716]offer greater detail on the estimation of the parameters of both the fixed-effects and the random-effects models. It is enough for our purposes to accept that the econometricians have found a number of ways to estimate these parameters.

## Random-effects or fixed effect model?

Economists generally prefer to use fixed-effects models. The decision to use fixed-effects or random-effects does not matter when T is large because the two methods will yield the same estimates of the parameters. When the number of individual categories ( N ) is large and the number of time periods ( T ) is small, the choice of which model to use becomes unclear. Hsiao summarized this somewhat arcane issue with the following observations:

If the effects of omitted variables can be appropriately summarized by a random variable and the individual (or time) effects represent the ignorance of the investigator, it does not see reasonable to treat one source of ignorance () as fixed and the other source of ignorance () as random. It appears that one way to unify the fixed-effects and random-effects models is to assume from
the outset that the effects are random. The fixed-effects model is viewed as one in which investigators make inferences conditional on the effects that are in the sample. The random-effects model is viewed as one in which investigators make unconditional or marginal inferences with respect to the population of all effects. There is really no distinction in the “nature (of the effect).” It is up to the investigator to decide whether to make inference with respect to population characteristics or only with respect to the effects that are in the sample. Hsiao [2003: 43]

Needless to say, Hsiao’s advice may well leave many researchers without any idea of whether to use a random-effects or a fixed-effects model. In your own research I suggest that you consult an econometrician for advice .

What fields keep nano created devices from performing or assimulating ? Magnetic fields ? Are do they assimilate ?
why we need to study biomolecules, molecular biology in nanotechnology?
?
Kyle
yes I'm doing my masters in nanotechnology, we are being studying all these domains as well..
why?
what school?
Kyle
biomolecules are e building blocks of every organics and inorganic materials.
Joe
anyone know any internet site where one can find nanotechnology papers?
research.net
kanaga
sciencedirect big data base
Ernesto
Introduction about quantum dots in nanotechnology
what does nano mean?
nano basically means 10^(-9). nanometer is a unit to measure length.
Bharti
do you think it's worthwhile in the long term to study the effects and possibilities of nanotechnology on viral treatment?
absolutely yes
Daniel
how to know photocatalytic properties of tio2 nanoparticles...what to do now
it is a goid question and i want to know the answer as well
Maciej
Abigail
for teaching engĺish at school how nano technology help us
Anassong
Do somebody tell me a best nano engineering book for beginners?
there is no specific books for beginners but there is book called principle of nanotechnology
NANO
what is fullerene does it is used to make bukky balls
are you nano engineer ?
s.
fullerene is a bucky ball aka Carbon 60 molecule. It was name by the architect Fuller. He design the geodesic dome. it resembles a soccer ball.
Tarell
what is the actual application of fullerenes nowadays?
Damian
That is a great question Damian. best way to answer that question is to Google it. there are hundreds of applications for buck minister fullerenes, from medical to aerospace. you can also find plenty of research papers that will give you great detail on the potential applications of fullerenes.
Tarell
what is the Synthesis, properties,and applications of carbon nano chemistry
Mostly, they use nano carbon for electronics and for materials to be strengthened.
Virgil
is Bucky paper clear?
CYNTHIA
carbon nanotubes has various application in fuel cells membrane, current research on cancer drug,and in electronics MEMS and NEMS etc
NANO
so some one know about replacing silicon atom with phosphorous in semiconductors device?
Yeah, it is a pain to say the least. You basically have to heat the substarte up to around 1000 degrees celcius then pass phosphene gas over top of it, which is explosive and toxic by the way, under very low pressure.
Harper
Do you know which machine is used to that process?
s.
how to fabricate graphene ink ?
for screen printed electrodes ?
SUYASH
What is lattice structure?
of graphene you mean?
Ebrahim
or in general
Ebrahim
in general
s.
Graphene has a hexagonal structure
tahir
On having this app for quite a bit time, Haven't realised there's a chat room in it.
Cied
what is biological synthesis of nanoparticles
what's the easiest and fastest way to the synthesize AgNP?
China
Cied
how did you get the value of 2000N.What calculations are needed to arrive at it
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