2  Types of economic data

Different types of econometric models are needed for different types of economic data.

2.1 Cross-sectional data

2.2 Time-series data

2.3 Panel data

Heteroskedasticity

In this chapter, we will use the following packages:

library(tidyverse)
library(wooldridge)
library(lmtest)

We the constant variance assumption.

\[ \text{Var}(u_i|X)=\sigma^2 \]

Heteroskedasticity is a violation of the constant variance assumption and instead we have:

\[ \text{Var}(u_i|X)=\sigma^2_i \]

2.4 How to detect heteroskedasticity?

We can test for heteroskedasticity using the Breusch-Pagan test. The null hypothesis is that there is no heteroskedasticity. The alternative hypothesis is that there is heteroskedasticity.