Template-type: ReDIF-Paper 1.0
Author-Name: Pudney, Stephen
Author-Name: Hernandez, Monica
Title: What you don’t see can’t hurt you? Panel data analysis and the dynamics of unobservable factors
Abstract: 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.

Creation-Date: 20110514
Number: 2011-13
Publication-Status: published
File-URL: https://www.iser.essex.ac.uk/wp-content/uploads/files/working-papers/iser/2011-13.pdf
File-Format: Application/pdf
Handle: RePEc:ese:iserwp:2011-13