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372
Estimation and Inference in Large Heterogeneous Panels with a Multifactor Error Structure
, 2004
"... This paper presents a new approach to estimation and inference in panel data models with a multifactor error structure where the unobserved common factors are (possibly) correlated with exogenously given individualspecific regressors, and the factor loadings differ over the cross section units. The ..."
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Cited by 383 (44 self)
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This paper presents a new approach to estimation and inference in panel data models with a multifactor error structure where the unobserved common factors are (possibly) correlated with exogenously given individualspecific regressors, and the factor loadings differ over the cross section units. The basic idea behind the proposed estimation procedure is to filter the individualspecific regressors by means of (weighted) crosssection aggregates such that asymptotically as the crosssection dimension ( N) tends to infinity the differential effects of unobserved common factors are eliminated. The estimation procedure has the advantage that it can be computed by OLS applied to an auxiliary regression where the observed regressors are augmented by (weighted) cross sectional averages of the dependent variable and the individual specific regressors. Two different but related problems are addressed: one that concerns the coefficients of the individualspecific regressors, and the other that focusses on the mean of the individual coefficients assumed random. In both cases appropriate estimators, referred to as common correlated effects (CCE) estimators, are proposed and their asymptotic distribution as N →∞, with T (the timeseries dimension) fixed or as N and T →∞(jointly) are derived under different regularity conditions. One important feature of the proposed CCE mean group (CCEMG) estimator is its invariance to the (unknown but fixed) number of unobserved common factors as N and T →∞(jointly). The small sample properties of the various pooled estimators are investigated by Monte Carlo experiments that confirm the theoretical derivations and show that the pooled estimators have generally satisfactory small sample properties even for relatively small values of N and T.
2010. Executive Compensation: A New View from a Longterm Perspective
 Review of Financial Studies 23:2099–138
, 1936
"... We analyze the longrun trends in executive compensation using a new dataset of top officers of large firms from 1936 to 2005. The median real value of compensation was remarkably flat from the late 1940s to the 1970s, revealing a weak relationship between pay and aggregate firm growth. By contras ..."
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Cited by 79 (1 self)
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We analyze the longrun trends in executive compensation using a new dataset of top officers of large firms from 1936 to 2005. The median real value of compensation was remarkably flat from the late 1940s to the 1970s, revealing a weak relationship between pay and aggregate firm growth. By contrast, this correlation was much stronger in the past thirty years. This historical perspective also suggests that compensation arrangements have often helped to align managerial incentives with those of shareholders because executive wealth was sensitive to firm performance for most of our sample. These new facts pose a challenge to several common explanations for the rise in executive pay since the 1980s. (JEL G30, J33, M52, N32) The compensation paid to CEOs of large publicly traded corporations rose dramatically during the 1980s and 1990s, stimulating much debate on the determinants of managerial pay (Murphy 1999; Hall and Murphy 2003). The discussion has been largely inconclusive, in part because readily available data only exist for the time period after 1970. By constructing a new longrun time series on executive pay, we are able to consistently document the trends in the level and structure of pay over most of the twentieth century. This historical perspective reveals several new facts that contrast sharply with data from recent decades, allowing us to reassess some of the most popular explanations for the recent surge in compensation. Although the stylized facts on executive pay since the 1970s are well established, only a handful of studies analyzed managerial compensation prior to
Unit Roots and Cointegration in Panels
, 2007
"... This paper provides a review of the literature on unit roots and cointegration in panels where the time dimension (T), and the cross section dimension (N) are relatively large. It distinguishes between the first generation tests developed on the assumption of the cross section independence, and the ..."
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Cited by 54 (3 self)
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This paper provides a review of the literature on unit roots and cointegration in panels where the time dimension (T), and the cross section dimension (N) are relatively large. It distinguishes between the first generation tests developed on the assumption of the cross section independence, and the second generation tests that allow, in a variety of forms and degrees, the dependence that might prevail across the different units in the panel. In the analysis of cointegration the hypothesis testing and estimation problems are further complicated by the possibility of cross section cointegration which could arise if the unit roots in the different cross section units are due to common random walk components.
Large panels with common factors and spatial correlations
 IZA DISCUSSION PAPER
, 2007
"... This paper considers the statistical analysis of large panel data sets where even after conditioning on common observed effects the cross section units might remain dependently distributed. This could arise when the cross section units are subject to unobserved common effects and/or if there are spi ..."
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Cited by 52 (5 self)
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This paper considers the statistical analysis of large panel data sets where even after conditioning on common observed effects the cross section units might remain dependently distributed. This could arise when the cross section units are subject to unobserved common effects and/or if there are spill over effects due to spatial or other forms of local dependencies. The paper provides an overview of the literature on cross section dependence, introduces the concepts of timespecific weak and strong cross section dependence and shows that the commonly used spatial models are examples of weak cross section dependence. It is then established that the Common Correlated Effects (CCE) estimator of panel data model with a multifactor error structure, recently advanced by Pesaran (2006), continues to provide consistent estimates of the slope coefficient, even in the presence of spatial error processes. Small sample properties of the CCE estimator under various patterns of cross section dependence, including spatial forms, are investigated by Monte Carlo experiments. Results show that the CCE approach works well in the presence of weak and/or strong cross sectionally correlated errors. We also explore the role of certain characteristics of spatial processes in determining the performance of CCE estimators, such as the form and intensity of spatial dependence, and the sparseness of the spatial weight matrix.
Capital Accumulation and Growth: A New Look at the Empirical Evidence,” unpublished
, 2004
"... We present evidence that an increase in investment as a share of GDP predicts a higher growth rate of output per worker, not only temporarily, but also in the steady state. These results are found using pooled annual data for a large panel of countries, using pooled data for nonoverlapping fiveyea ..."
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Cited by 48 (0 self)
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We present evidence that an increase in investment as a share of GDP predicts a higher growth rate of output per worker, not only temporarily, but also in the steady state. These results are found using pooled annual data for a large panel of countries, using pooled data for nonoverlapping fiveyear periods, or allowing for heterogeneity across countries in regression coefficients. They are robust to model specifications and estimation methods. The evidence that investment has a longrun effect on growth rates is consistent with the main implication of certain endogenous growth models, such as the AK model.
Estimation and inference in short panel vector autoregressions with unit roots and cointegration
, 2003
"... This paper considers estimation and inference in panel vector autoregressions (PVARs) where (i) the individual effects are either random or fixed, (ii) the timeseries properties of the model variables are unknown a priori and may feature unit roots and cointegrating relations, and (iii) the time di ..."
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Cited by 47 (1 self)
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This paper considers estimation and inference in panel vector autoregressions (PVARs) where (i) the individual effects are either random or fixed, (ii) the timeseries properties of the model variables are unknown a priori and may feature unit roots and cointegrating relations, and (iii) the time dimension of the panel is short and its crosssectional dimension is large. Generalized Method of Moments (GMM) and Quasi Maximum Likelihood (QML) estimators are obtained andthencomparedintermsoftheirasymptoticandfinite sample properties. It is shown that GMM estimators based only on standard orthogonality conditions break down if the underlying time series contain unit roots. Extended GMM estimators making use of further moment conditions are not subject to this problem. However, their finite sample performance is shown to deteriorate as a ratio of crosssection to timeseries variation is increased, while the performance of the fixed effects QML estimator is invariant to this ratio. The QML estimators also tend to outperform the various GMM estimators in finite sample. Overall, our findings favor the use of the fixed effects QML estimator, given that it does not impose any restrictions on the distribution generating the individual effects. The paper also shows how the fixed effects QML
Weak and Strong Cross Section Dependence and Estimation of Large Panels
, 2009
"... This paper introduces the concepts of timespecific weak and strong cross section dependence. A doubleindexed process is said to be cross sectionally weakly dependent at a given point in time, t, if its weighted average along the cross section dimension (N) converges to its expectation in quadratic ..."
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Cited by 44 (22 self)
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This paper introduces the concepts of timespecific weak and strong cross section dependence. A doubleindexed process is said to be cross sectionally weakly dependent at a given point in time, t, if its weighted average along the cross section dimension (N) converges to its expectation in quadratic mean, as N is increased without bounds for all weights that satisfy certain ‘granularity’ conditions. Relationship with the notions of weak and strong common factors is investigated and an application to the estimation of panel data models with an infinite number of weak factors and a finite number of strong factors is also considered. The paper concludes with a set of Monte Carlo experiments where the small sample properties of estimators based on principal components and CCE estimators are investigated and compared under various assumptions on the nature of the unobserved common effects.
Internal capital markets and lending by multinational bank subsidiaries
 Journal of Financial Intermediation
, 2010
"... We use panel data on the intragroup ownership structure and balance sheets of 45 of the largest banking groups from 1992 to 2004 to analyse what determines the credit growth of multinational bank subsidiaries. Both home and hostcountry conditions and characteristics of the subsidiaries themselves ..."
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Cited by 43 (1 self)
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We use panel data on the intragroup ownership structure and balance sheets of 45 of the largest banking groups from 1992 to 2004 to analyse what determines the credit growth of multinational bank subsidiaries. Both home and hostcountry conditions and characteristics of the subsidiaries themselves and their parent banks are taken into account. We find that the lending of multinational bank subsidiaries is influenced by substitution effects, in which parent banks tradeoff lending in several countries, as well as support effects, in which parent banks support weak subsidiaries. This provides strong evidence for the existence of internal capital markets through which multinational banks manage the credit growth of their subsidiaries. We also find that greenfield subsidiaries are
The performance of panel unit root and stationarity tests: Results from a large scale simulation study
 in: Econometric Reviews
, 2006
"... This paper presents results concerning the size and power of first generation panel unit root and stationarity tests obtained from a large scale simulation study, with in total about 290 million test statistics computed. The tests developed in the following papers ..."
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Cited by 38 (5 self)
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This paper presents results concerning the size and power of first generation panel unit root and stationarity tests obtained from a large scale simulation study, with in total about 290 million test statistics computed. The tests developed in the following papers
Panel Cointegration with Global Stochastic Trends: Supplementary Appendix
, 2006
"... Part of the Econometrics Commons This Working Paper is brought to you for free and open access by the Maxwell School of Citizenship and Public Affairs at SURFACE. It has been accepted for inclusion in Center for Policy Research by an authorized administrator of SURFACE. For more information, please ..."
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Cited by 38 (2 self)
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Part of the Econometrics Commons This Working Paper is brought to you for free and open access by the Maxwell School of Citizenship and Public Affairs at SURFACE. It has been accepted for inclusion in Center for Policy Research by an authorized administrator of SURFACE. For more information, please contact