Python Panel Data

Purpose

pandas

statsmodels

linearmodels

When to Use

• Estimating fixed effects or random effects models
• Running difference-in-differences on panel data
• Creating regression tables and plots in Python

Instructions

Step 1: Understand the Context

• What is the unit of observation and panel identifiers?
• Which outcomes and regressors are required?
• What fixed effects or time effects are needed?
• How should standard errors be clustered?

Step 2: Generate the Output

1. Loads and cleans the data with

   pandas

2. Sets a MultiIndex for panel structure
3. Fits the model using

   linearmodels.PanelOLS

   or

   RandomEffects

4. Outputs results in a readable table and optional LaTeX

Step 3: Verify and Explain

• Interpret key coefficients
• Note assumptions (strict exogeneity, parallel trends, etc.)
• Suggest robustness checks (alternative clustering, placebo tests)

Example Prompts

• "Run a two-way fixed effects model with firm and year effects"
• "Estimate a DiD using state and year fixed effects"
• "Export panel regression results to LaTeX"

Example Output

# ============================================
# Panel Data Analysis in Python
# ============================================
import pandas as pd
from linearmodels.panel import PanelOLS

# Load data
df = pd.read_csv("panel_data.csv")

# Set panel index
df = df.set_index(["firm_id", "year"])

# Create treatment indicator
df["treat_post"] = df["treated"] * df["post"]

# Two-way fixed effects model
model = PanelOLS.from_formula(
    "outcome ~ 1 + treat_post + EntityEffects + TimeEffects",
    data=df
)
results = model.fit(cov_type="clustered", cluster_entity=True)

print(results.summary)

Requirements

Software

• Python 3.10+

Packages

• pandas

• linearmodels

• statsmodels

pip install pandas linearmodels statsmodels

Best Practices

1. Always verify panel identifiers and balanced vs unbalanced panels
2. Cluster standard errors at the appropriate level
3. Check for missing data before estimation

Common Pitfalls

• Failing to set a proper panel index
• Using pooled OLS when fixed effects are required
• Misinterpreting coefficients without accounting for fixed effects

References

• linearmodels documentation
• statsmodels documentation
• Wooldridge (2010) Econometric Analysis of Cross Section and Panel Data

Changelog

v1.0.0

• Initial release