Dear colleagues,
I am planning to investigate the panel data set containing three countries and 10 variables. The time frame is a bit short that concerns me (between 2011-2020 for each country). What should be the sample size in this case? Can I apply fixed effects, random effects, or pooled OLS?
Thank you for your responses beforehand.
Best
Ibrahim
You can convert sample size into quarterly to increase the observations.
Yes you can apply all the tests. Results of Hausman test decided
Whether Fixed effect or random effects will be used.
All the best
It seems a very small sample to apply microeconometric techniques. Having 27 seven observations and 10 covariates, at most, you will have 27 - 1 - 10 = 16 degrees of freedom. This is pretty low. If I had to decide to pursue a project based on that, I would try to avoid it.
It is really closer to multiple times series than panel data. Have a look at this link:
https://www.statalist.org/forums/forum/general-stata-discussion/general/1552273-small-n-and-large-t-panel-analysis
Thank you dear José-Ignacio Antón
In this case, I think even OLS can be insufficient. But what else can be applied to such a data set? I can reduce the covariates down to 5-6.
Best
Ibrahim
Ibrahim Niftiyev , you can apply Bayesian methods, as Bayesian methods are valid even for small samples. I ran very sophisticated models with less than 10 observations at times (not because I like it, but because I needed to). See for example:
Article Modeling Hyperinflation Phenomenon: A Bayesian Approach
Thank you, dear Rolando Gonzales Martinez
I will have a look at your paper soon. This might be a good approach.
Best
Ibrahim
You are welcome, Ibrahim Niftiyev , probably of interest, too:
https://www.stata.com/features/overview/bayesian-panel-data-models/
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