Benefits and limitations of panel data

Observations for a number of cross-sectional units over time have become increasingly available. The new data sources enable econometricians to construct and test more complicated behavioral models than a single cross sectional or time series data set would allow. The availability of new data sources, however, also raises new issues. In this paper we review some basic econo- metric methods that have been used to analyze such data sets. We also indicate areas of research where panel data may be useful.