Chapter 7. Panel data

Table of Contents
Panel structure
Dummy variables
Lags and differences with panel data
Pooled estimation
Illustration: the Penn World Table

Panel structure

Panel data are inherently three dimensional — the dimensions being variable, cross-sectional unit, and time-period. For representation in a textual computer file (and also for gretl's internal calculations) these three dimensions must somehow be flattened into two. This "flattening" involves taking layers of the data that would naturally stack in a third dimension, and stacking them in the vertical dimension.

Gretl always expects data to be arranged "by observation", that is, such that each row represents an observation (and each variable occupies one and only one column). In this context the flattening of a panel data set can be done in either of two ways:

You may use whichever arrangement is more convenient. Under gretl's Sample menu you will find an item "Restructure panel" which allows you to convert from stacked cross section form to stacked time series or vice versa.

When you import panel data into gretl from a spreadsheet or comma separated format, the panel nature of the data will not be recognized automatically (most likely the data will be treated as "undated"). A panel interpretation can be imposed on the data in either of two ways.

  1. Use the GUI menu item "Sample, Dataset structure". In the first dialog box that appears, select "Panel". In the next dialog, make a selection between stacked time series or stacked cross sections depending on how your data are organized. In the next, supply the number of cross-sectional units in the dataset. Finally, check the specification that is shown to you, and confirm the change if it looks OK.

  2. Use the script command setobs. For panel data this command takes the form setobs freq 1:1 structure, where freq is replaced by the "block size" of the data (that is, the number of periods in the case of stacked time series, or the number of cross-sectional units in the case of stacked cross-sections) and structure is either --stacked-time-series or --stacked-cross-section. Two examples are given below: the first is suitable for a panel in the form of stacked time series with observations from 20 periods; the second for stacked cross sections with 5 cross-sectional units.

    
	    setobs 20 1:1 --stacked-time-series
    	    setobs 5 1:1 --stacked-cross-section