Estimation of Change Points in Panel Models

This paper studies a panel data regression setting, where a break occurs at a unknown common date. In this paper, we establish the consistency and rate of convergence of the change point estimator. The break date can be estimated consistently both in …xed time horizon and large panels, which indicates that the structural change can be well detected even in short panels. Furthermore, the limiting distribution is derived without the assumption of shrinking magnitude of break. These two features are di¤erent from the time series change point literature. Monte Carlo simulations are presented to investigate the …nite sample properties of the panel change point estimator. Keywords: Panel data, Change point, Consistency. JEL Classi…cation: C12, C13, C22. Address correspondence to Chihwa Kao, Center for Policy Research, 426 Eggers Hall, Syracuse, NY 13244-1020, email: [email protected]. Qu Feng, email: [email protected]. Štμepána Lazarová, email: [email protected].