Random Coe¢ cient Panel Data Models

This paper provides a review of linear panel data models with slope heterogeneity, introduces various types of random coe¢ cients models and suggests a common framework for dealing with them. It considers the fundamental issues of statistical inference of a random coe¢ cients formulation using both the sampling and Bayesian approaches. The paper also provides a review of heterogeneous dynamic panels, testing for homogeneity under weak exogeneity, simultaneous equation random coe¢ cient models, and the more recent developments in the area of cross-sectional dependence in panel data models. Keywords: Random coe¢ cient models, Dynamic heterogeneous panels, Classical and Bayesian approaches, Tests of slope heterogeneity, Cross section dependence. JEL-Classi…cation: C12, C13, C33. We are grateful to an anonymous referee, G. Bressons, A. Pirotte, and particularly Takashi Yamagata for their careful reading of an early version and for pointing out many typos and for their good suggestions. We would also like to thank J. Breitung and Ron Smith for helpful comments.