Assignment for session held on Mar 12,2013

Assignment 8 : Panel Data Analysis

A1:Do Panel Data Analysis of "Produc" data analyzing  on three types of model :Pooled affect model,
Fixed affect model,and Random affect model

A2:Determine which model is the best using :
       pFtest : Fixed vs Pooled
       plmtest : Pooled vs Random
       phtest: Random vs Fixed

  Pooled Model

Command: 

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

Command: 

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

Command: 

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

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 is better than Pooled Model

Pooled vs Random 

Null Hypothesis: Pooled Model

Alternate Hypothesis: Random Model

Since the p value is negligible so we reject the Null Hypothesis and hence Alternate hypothesis is accepted i.e. 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: 

Making all the comparisons we can conclude that Fixed Model is best suited for panel data analysis for "Product" data set.

Hence , within the same id i.e. within same "state" there is no variation.