IT Business Lab Class 8

IT Business Lab Class 8 - Panel Data Analysis

  To carry out Panel Data Analysis of "Produc" data and to analyze the 3 types of model :
      1  Pooled affect model
      2 Fixed affect model
      3 Random affect model

To determine most efficient model by using following functions:
       pFtest : Fixed vs Pooled
       plmtest : Pooled vs Random
       phtest: Random vs Fixed

  Pooled Model

pool<-plm( log(pcap) ~ log(hwy) +  log(water) + log(util) + log(pc) + log(gsp) + log(emp) + log(unemp)

, data= Produc, model = ("pooling"), index = c("state","year"))

 Fixed Model

fixed<-plm( log(pcap) ~ log(hwy) +  log(water) + log(util) + log(pc) + log(gsp) + log(emp) + log(unemp)

, data= Produc, model = ("within"), index = c("state","year"))

 Random Model

random<-plm( log(pcap) ~ log(hwy) +  log(water) + log(util) + log(pc) + log(gsp) + log(emp) + log(unemp)

, data= Produc, model = ("random"), index = c("state","year"))

Pooled vs Fixed 

Null Hypothesis: Pooled Model is efficient than fixed model

Alternate Hypothesis : Pooled model is not efficient than the fixed model

Since the p value is very small, we reject the Null Hypothesis. And so alternate hypothesis is accepted which is to accept Fixed Model is better than Pooled Model

Pooled vs Random 

Null Hypothesis: Pooled Model is efficient than Random model

Alternate Hypothesis: Random Model is efficient than Pooled model

Since the p value is very small, we reject the Null Hypothesis. And so alternate hypothesis is accepted which is to accept Random Model is better than Pooled Model

Random vs Fixed 

Null Hypothesis: No Correlation . Random Model

Alternate Hypothesis: Fixed Model

Since the p value is negligible so we reject the Null Hypothesis and hence Alternate hypothesis is accepted which is to accept Fixed Model.

Conclusion: 

  The analysis proves that Fixed Model is the best suited to do the panel data analysis for "Produc" data set. And also we observe that within the same id the variation is null.