A Sequential Panel Selection Method (SPSM) to Regression Estimates: An Application to the Revenue-Expenditure Relationship in South African Provinces
This paper extends the sequential panel selection method (SPSM) to the case of regression estimates as a means exploiting the power properties presented by panel estimates whilst retaining the heterogeneity advantages offered country-specific estimates. As an application we apply this technique to investigate the expenditure-revenue relationship for 12 South African provinces using the annual data spanning from 2000 to 2016. We find that the SPSM method can be effectively used to segregate the provinces with sustainable budgets from those with less sustainable budgets while preserving the power advantages presented by pane estimation techniques.
Index Terms - Sequential panel selection method (SPSM); ordinary least squares (OLS), panel ordinary least squares (POLS) revenue-expenditure, South Africa.