Panel Random Effects Model

The panel random effects model is a regression for panel data that treats unobserved unit-specific effects as random and uncorrelated with the regressors, allowing estimation of both time-varying and time-invariant predictors.

패널 확률효과모형은 관찰되지 않은 개체별 효과를 설명변수와 상관없는 확률효과로 보고, 시간에 따라 변하는 변수와 변하지 않는 변수의 효과를 모두 추정하는 패널 회귀모형입니다.

How do I analyze panel data when I also want to estimate effects of variables that do not change over time?

시간에 따라 변하지 않는 변수의 효과도 추정하고 싶을 때 패널 데이터는 어떻게 분석하나요?

The random effects model accounts for repeated observations of the same units by including a random unit-level intercept, and it can estimate coefficients on time-invariant variables such as region or gender. It is appropriate when unit effects are plausibly uncorrelated with the predictors, which is commonly checked against fixed effects with a Hausman test.

When to use Panel Random Effects Model

• Individuals, firms, or regions observed repeatedly over several periods
• Time-invariant predictors whose effects need to be estimated
• Units that can reasonably be viewed as a sample from a larger population

When to use something else

• Unit effects likely correlated with predictors: use the panel fixed effects model
• No evidence of unit-level heterogeneity: use pooled OLS

Assumptions and requirements

• Unit effects uncorrelated with the regressors
• Strictly exogenous predictors
• Cluster-robust standard errors if errors are heteroskedastic or serially correlated

What the analysis reports

• Coefficients with cluster-robust standard errors
• Variance components and the share of variance due to unit effects (rho)
• Within, between, and overall R²
• Hausman test against fixed effects
• Breusch-Pagan LM test against pooled OLS

How to report it

A random effects model with cluster-robust standard errors showed that [predictor] was positively associated with [outcome], b = [value], SE = [value], p = [value], and the Hausman test did not reject the random effects specification, χ²([df]) = [value], p = [value].

Related methods

• Panel Fixed Effects Model
• Pooled OLS
• Linear Mixed-Effects Model

Run Panel Random Effects Model on Quorant