Heterogeneous Three-Dimensional Panel Data Models

Abstract

This paper examines panel data models, which vary in size and shape depending on their properties. When parameters vary across units and time, it is called a heterogeneous panel data model. The paper proposes suitable tests for slope homogeneity in three-dimensional panel data, using actual data from the United Nations Industrial Development Organization (UNIDO). The results showed significant evidence of cross-sectional dependence and slope heterogeneity. The paper recommends mean group, common correlated effect mean group, and augmented mean group estimators for heterogeneous three-dimensional panel data models in the case of cross-sectional dependency, with the common correlated effect mean group estimator being the most accurate.