Time Invariant Variables in the Mundlak and Hausman-Taylor Panel Data Models

Author(s)/Creator(s)

Badi H. Baltagi, Syracuse UniversityFollow
Long Liu, Florida Atlantic UniversityFollow

Description/Abstract

This paper shows that the classic augmented Mundlak (1978) regression yields the between estimator for time-invariant variables. It is well known that the estimates of the time varying variables yield the fixed effects estimates. While the latter are consistent for this correlated random effects model, the between estimates are not. The between estimator is consistent only when the Hausman (1978) test does not reject the null based on between versus fixed effects. An alternative modified Hausman and Taylor (1981) estimator is proposed. Monte Carlo experiments are performed to compare various estimators under a correlated random effects as well as a purely random effects model.

Document Type

Working Paper

Date

3-9-2026

Keywords

Panel data, fixed effects, correlated random effects, instrumental variables, time-invariant variables

Language

English

Series

Working Papers Series

Disciplines

Econometrics | Economics

ISSN

1525-3066

Additional Information

CPR Working Paper No. 288

Recommended Citation

Baltagi, Badi H. and Liu, Long, "Time Invariant Variables in the Mundlak and Hausman-Taylor Panel Data Models" (2026). Center for Policy Research. 526.
https://surface.syr.edu/cpr/526

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.