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Endogeneity and Heterogeneity in LDV Panel Data Models

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Author Info
Jacob N. Arendt () (Institute of Local Government Studies)

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Abstract

We extend three existing cross-sectional limited dependent variable (LDV) estimators, that allow for endogenous regressors, to a panel data model. We focus on estimation of effects of timeinvariant endogenous regressors, since to our knowledge, besides joint maximum likelihood, no other alternative consistent parametric estimators than the ones suggested here exist. We compare their small sample performance of estimates of marginal effects to i.i.d. LDV estimators as well as to linear estimators by means of Monte Carlo Studies. Some notable differences in the performance of the LDV estimators appear. One estimator, the 2SIV, performs reasonably well in terms of bias, even with weak instruments. Another type, the AGLS estimators, have a large small sample bias when no endogeneity is present. The 2SCML estimators seem to perform reasonable in most scenarios even under some types of misspecification. In addition, 2SLS performed relatively well, but had a substantial MSE with weak instruments and substantial bias in misspecified scenarios. Although potentially important because of heterogeneity bias, our extension of LDV models to the panel case did not give improvements in small sample performance over the cross-sectional estimators.

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Paper provided by International Conferences on Panel Data in its series 10th International Conference on Panel Data, Berlin, July 5-6, 2002 with number D6-1.

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Date of creation: Mar 2002
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Handle: RePEc:cpd:pd2002:d6-1

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Related research
Keywords: Two-Step Estimation; Panel Data; Endogenous Regressor; Time-Invariant Regressor; Linear Approximation;

Find related papers by JEL classification:
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models
C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models

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References listed on IDEAS
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    Other versions:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. J L Ford & K Park & S Sen, 2009. "All Work and No Play: Pecuniary Versus Non-Pecuniary Factors in the Labour Supply of the Elderly," Discussion Papers 09-08, Department of Economics, University of Birmingham. [Downloadable!]
  2. Swaminathan, Hema & Findeis, Jill, 2003. "Impact Of Credit On Labor Allocation And Consumption Patterns In Malawi," 2003 Annual meeting, July 27-30, Montreal, Canada 22118, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
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