Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity
AbstractI study a simple, widely applicable approach to handling the initial conditions problem in dynamic, nonlinear unobserved effects models. Rather than attempting to obtain the joint distribution of all outcomes of the endogenous variables, I propose finding the distribution conditional on the initial value (and the observed history of strictly exogenous explanatory variables). The approach is flexible, and results in simple estimation strategies for at least three leading dynamic, nonlinear models: probit, Tobit, and Poisson regression. I treat the general problem of estimating average partial effects, and show that simple estimators exist for important special cases.
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Bibliographic InfoPaper provided by Centre for Microdata Methods and Practice, Institute for Fiscal Studies in its series CeMMAP working papers with number CWP18/02.
Length: 44 pp.
Date of creation: Jun 2002
Date of revision:
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Postal: The Institute for Fiscal Studies 7 Ridgmount Street LONDON WC1E 7AE
Other versions of this item:
- Jeffrey M. Wooldridge, 2005. "Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(1), pages 39-54.
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
This paper has been announced in the following NEP Reports:
- NEP-DCM-2002-10-18 (Discrete Choice Models)
- NEP-ECM-2002-10-18 (Econometrics)
- NEP-ETS-2002-10-18 (Econometric Time Series)
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