Hernandez, M. and Pudney, S. (2012) What you don't see can't hurt you? Panel data analysis and the dynamics of unobservable factors. HEDS Discussion Paper 12/6. (Unpublished)
We investigate the consequences of using time-invariant individual effects in panel data models when the unobservables are in fact time-varying. Using data from the British Offending Crime and Justice panel, we estimate a dynamic factor model of the occurrence of a range of illicit activities as outcomes of young people’s development processes. This structure is then used to demonstrate that relying on the assumption of time-invariant individual effects to deal with confounding factors in a conventional dynamic panel data model is likely to lead to spurious “gateway” effects linking cannabis use to subsequent hard drug use.
|Keywords:||Panel data; Dynamic factor models; Individual effects; Illicit drugs; Crime; Gateway effect|
|Institution:||The University of Sheffield|
|Academic Units:||The University of Sheffield > Faculty of Medicine, Dentistry and Health (Sheffield) > School of Health and Related Research (Sheffield) > Health Economics and Decision Science > HEDS Discussion Paper Series|
|Depositing User:||Miss Stephanie Haslam|
|Date Deposited:||10 May 2012 14:47|
|Last Modified:||16 Jun 2014 12:00|