Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/65953 
Year of Publication: 
2011
Series/Report no.: 
ISER Working Paper Series No. 2011-13
Publisher: 
University of Essex, Institute for Social and Economic Research (ISER), Colchester
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.
Subjects: 
Panel data
Dynamic factor models
Individual effects
Illicit drugs
Crime
Gateway effect
JEL: 
C33
I18
K42
Document Type: 
Working Paper

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