Abstract: Publisher Summary This chapter describes the dynamic models for panel data. It also discusses the consequences of estimating a static panel model using data on individuals who are involved in a dynamic adjustment process. Whenever a static model is used to explain economic behavior, it is implicitly assumed that individuals adjust immediately to changes in the exogenous variables or to random shocks, or that any adjustment is completed between waves. One of the advantages of panel data is that it can model the adjustment process. The chapter further discusses the fixed effect and random effect estimators in dynamic models. It also provides the treatment of initial observations in dynamic random effects models.