Time‐series–cross‐section Data

This article treats the analysis of ‘time‐series–cross‐section’ (TSCS) data. Such data consists of repeated observations on a series of fixed units. Examples of such data are annual observations on the political economy of OECD nations in the post‐war era. TSCS data is distinguished from ‘panel’ data, in that asymptotics are in the number of repeated observations, not the number of units. The article begins by treating the complications of TSCS data in an ‘old‐fashioned’ manner, that is, as a nuisance which causes estimation difficulties. It claims that TSCS data should be analyzed via ordinary least squares with ‘panel correct standard errors’ rather than generalized least squares methods. Dynamics should be modeled via a lagged dependent variable or, if appropriate, a single equation error correction model. The article then treats more modern issues, in particular, the modeling of spatial effects and heterogeneity. It also claims that heterogeneity should be assessed with ‘panel cross‐validation’ as well as more standard tests. The article concludes with a discussion of estimation in the presence of a binary dependent variable.