Ridge Regression for Panel Data
Hi, I am doing a unit-fixed effects panel data analysis to examine the relationship between income and education for 26 regions over 9 years. My dependent variable is Gini, independent variables are proportion of graduates from various levels of education to total population and my controls are regional GDP, regional CPI, regional unemployment, regional LFPR and net migration rate. However, my model suffers from multicollinearity. I've been looking at regularisation techniques and want to use Ridge but I am not sure if it is suitable for panel data. Can anyone give me advice/recommendations on this please? Thanks very much in advance!!
Skalonga
7
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