A General Panel Model for Unobserved Time Heterogeneity with Application to the Politics of Mass Incarceration. Issue 2 (August 2021)

• Record Type: Journal Article
• Authors: Duxbury, Scott W.
• Is Part Of: Sociological methodology. Volume 51:Issue 2(2021)
• Page Start: 348
• Page End: 377
• Publication Date: 2021-08
• Subjects: panel data -- fixed effects -- random effects -- time heterogeneity -- mass incarceration; Sociology -- Methodology -- Periodicals; Sociology; 301.01
• DOI: 10.1177/00811750211016033
• Languages: English
• ISSNs: 0081-1750

Abstract

Panel data analysis is common in the social sciences. Fixed effects models are a favorite among sociologists because they control for unobserved heterogeneity (unexplained variation) among cross-sectional units, but estimates are biased when there is unobserved heterogeneity in the underlying time trends. Two-way fixed effects models adjust for unobserved time heterogeneity but are inefficient, cannot include unit-invariant variables, and eliminate common trends: the portion of variance in a time-varying variable that is invariant across cross-sectional units. This article introduces a general panel model that can include unit-invariant variables, corrects for unobserved time heterogeneity, and provides the effect of common trends while also allowing for unobserved unit heterogeneity, time-varying coefficients, and time-invariant variables. One-way and two-way fixed effects models are shown to be restrictive forms of this general model. Other restrictive forms are also derived that offer all the usual advantages of one-way and two-way fixed effects models but account for unobserved time heterogeneity. The author uses the models to examine the increase in state incarceration rates between 1970 and 2015.