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Split-panel jackknife estimation of fixed-effect models

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  • DHAENE, Geert

    ()
    (K.U.Leuven, Department of Economics, B-3000 Leuven, Belgium)

  • JOCHMANS, Koen

    ()
    (Center for Operations Research and Econometrics (CORE), Université catholique de Louvain (UCL), Louvain la Neuve, Belgium)

Abstract

We propose a jackknife for reducing the order of the bias of maximum likelihood estimates of nonlinear dynamic fixed-effect panel models. In its simplest form, the half-panel jackknife, the estimatorisjust 2θˆ−θ1/2,where θˆ!istheMLEfromthefullpaneland θ1/2 istheaverageofthe two half-panel MLEs, each using T/2 time periods and all N cross-sectional units. This estimatoreliminates the first-order bias of θˆ . The order of the bias is further reduced if two partitions of the panel are used, for example, two half-panels and three 1/3-panels, and the corresponding MLEs.On further partitioning the panel, any order of bias reduction can be achieved. The split-panel jackknife estimators are asymptotically normal, centered at the true value, with variance equal to that of the MLE under asymptotics where T is allowed to grow slowly with N. In analogous fashion, the split-panel jackknife reduces the bias of the profile likelihood and the bias of marginal-effect estimates. Simulations in fixed-effect dynamic discrete-choice models with small T show that the split-panel jackknife effectively reduces the bias and mean squared error of the MLE, and yields confidence intervals with much better coverage.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2010003.

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Date of creation: 01 Jan 2010
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Handle: RePEc:cor:louvco:2010003

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Keywords: jackknife; asymptotic bias correction; dynamic panel data; fixed effects;

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Cited by:
  1. Fernández-Val, Iván & Vella, Francis, 2011. "Bias corrections for two-step fixed effects panel data estimators," Journal of Econometrics, Elsevier, vol. 163(2), pages 144-162, August.
  2. repec:spo:wpecon:info:hdl:2441/eu4vqp9ompqllr09j0031f620 is not listed on IDEAS
  3. Alvaro Escribano & Szabolcs Blazsek, 2012. "Patents, secret innovations and firm's rate of return : differential effects of the innovation leader," Economics Working Papers we1202, Universidad Carlos III, Departamento de Economía.
  4. Alexander Chudik & M. Hashem Pesaran, 2013. "Common Correlated Effects Estimation of Heterogeneous Dynamic Panel Data Models with Weakly Exogenous Regressors," CESifo Working Paper Series 4232, CESifo Group Munich.
  5. Alessandra Casarico & Paola Profeta & Chiara Pronzato, 2012. "On the local labor market determinants of female university enrolment in European regions," Carlo Alberto Notebooks 278, Collegio Carlo Alberto.
  6. Marcus J Chambers & Maria Kyriacou, 2010. "Jackknife Bias Reduction in the Presence of a Unit Root," Economics Discussion Papers 685, University of Essex, Department of Economics.
  7. Laura Hospido, 2007. "Modelling Heterogeneity And Dynamics In The Volatility Of Individual Wages," Working Papers wp2007_0717, CEMFI.
  8. Dennis Kristensen & Bernard Salanie, 2013. "Higher-order properties of approximate estimators," CeMMAP working papers CWP45/13, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  9. Hyungsik Roger Moon & Martin Weidner, 2013. "Dynamic linear panel regression models with interactive fixed effects," CeMMAP working papers CWP63/13, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  10. Alexander Chudik & M. Hashem Pesaran, 2013. "Large Panel Data Models with Cross-Sectional Dependence: A Survey," CESifo Working Paper Series 4371, CESifo Group Munich.
  11. Dennis Kristensen & Bernard Salanié, 2010. "Higher Order Improvements for Approximate Estimators," CAM Working Papers 2010-04, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
  12. Geert Dhaene & Koen Jochmans, 2011. "Profile-score Adjustements for Nonlinearfixed-effect Models," Sciences Po publications info:hdl:2441/eu4vqp9ompq, Sciences Po.
  13. Iván Fernández-Val & Martin Weidner, 2013. "Individual and time effects in nonlinear panel models with large N,T," CeMMAP working papers CWP60/13, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  14. Fernández-Val, Iván & Savchenko, Yevgeniya & Vella, Francis, 2013. "Evaluating the Role of Individual Specific Heterogeneity in the Relationship Between Subjective Health Assessments and Income," IZA Discussion Papers 7651, Institute for the Study of Labor (IZA).
  15. Sun, Yixiao & Kim, Min Seong, 2009. "k-step Bootstrap Bias Correction for Fixed Effects Estimators in Nonlinear Panel Models," University of California at San Diego, Economics Working Paper Series qt9gn6n5mr, Department of Economics, UC San Diego.

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