Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/81514
Authors: 
Hess, Wolfgang
Persson, Maria
Rubenbauer, Stephanie
Gertheiss, Jan
Year of Publication: 
2013
Series/Report no.: 
IFN Working Paper 961
Abstract: 
When analyzing panel data using regression models, it is often reasonable to allow for time-varying covariate effects. We propose a novel approach to modelling timevarying coefficients in panel data regressions, which is based on penalized regression techniques. To illustrate the usefulness of this approach, we revisit the well-known empirical puzzle of the ‘death of distance’ in international trade. We find significant differences between results obtained with the proposed estimator and those obtained with ‘traditional’ methods. The proposed method can also be used for model selection, and to allow covariate effects to vary over other dimensions than time.
Subjects: 
Penalized Regression
Lasso-type Penalties
Varying Coefficient Models
Gravity
Death of Distance
Missing Globalization Puzzle
JEL: 
C23
C52
F10
Document Type: 
Working Paper

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