Advanced Search
MyIDEAS: Login to save this paper or follow this series

Profile-score Adjustements for Nonlinearfixed-effect Models

Contents:

Author Info

  • Geert Dhaene
  • Koen Jochmans

Abstract

Maximum-likelihood estimates of nonlinear panel data models with fixed effects are generally not consistent as the number of units, N, grows large while the number of time periods, T, stays fixed. The inconsistency can be viewed as a consequence of the bias of the score function, where the unit-specific parameters have been profiled out. We investigate ways of adjusting the profile score so as to make it unbiased or approximately unbiased. This leads to estimators, solving an adjusted profile score equation, that are fixed-T consistent or have less asymptotic bias, as T ! 1, than maximum likelihood. One approach to adjusting the profile score is to subtract its bias, evaluated at maximum- likelihood estimates of the fixed effects. When this bias does not depend on the incidental parameters, the adjustment is exact. Otherwise, it does not eliminate the bias entirely but reduces its order (in T), and it can be iterated, reducing the bias order further. We examine a range of nonlinear models with additive fixed effects. In many of these, an exact bias adjustment of the profile score is possible. In others, suitably adjusted profile scores exhibit much less bias than without the adjustment, even for very small T.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://spire.sciencespo.fr/hdl:/2441/eu4vqp9ompqllr09j0031f620/resources/profile-score3.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Sciences Po in its series Sciences Po publications with number info:hdl:2441/eu4vqp9ompqllr09j0031f620.

as in new window
Length:
Date of creation: 15 Mar 2011
Date of revision:
Handle: RePEc:spo:wpmain:info:hdl:2441/eu4vqp9ompqllr09j0031f620

Contact details of provider:
Web page: http://www.sciencespo.fr/
More information through EDIRC

Related research

Keywords: adjusted profile score; bias correction; fixed effects; nonlinear models.;

Find related papers by JEL classification:

References

References listed on IDEAS
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.:
as in new window
  1. Carro, Jesus M., 2007. "Estimating dynamic panel data discrete choice models with fixed effects," Journal of Econometrics, Elsevier, Elsevier, vol. 140(2), pages 503-528, October.
  2. Chamberlain, Gary, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 47(1), pages 225-38, January.
  3. L. Hospido, 2012. "Modelling heterogeneity and dynamics in the volatility of individual wages," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 27(3), pages 386-414, 04.
  4. Manuel Arellano & Stéphane Bonhomme, 2007. "Robust priors in nonlinear panel data models," CeMMAP working papers, Centre for Microdata Methods and Practice, Institute for Fiscal Studies CWP07/07, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  5. DHAENE, Geert & JOCHMANS, Koen, 2010. "Split-panel jackknife estimation of fixed-effect models," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 2010003, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, Econometric Society, vol. 49(6), pages 1417-26, November.
  7. Richard Blundell & Rachel Griffith & Frank Windmeijer, 1999. "Individual effects and dynamics in count data models," IFS Working Papers, Institute for Fiscal Studies W99/03, Institute for Fiscal Studies.
  8. Geert Dhaene & Koen Jochmans, 2011. "An Adjusted profile likelihood for non-stationary panel data models with fixel effects," Sciences Po publications, Sciences Po info:hdl:2441/eu4vqp9ompq, Sciences Po.
  9. Manuel Arellano & Jinyong Hahn, 2006. "A Likelihood-Based Approximate Solution To The Incidental Parameter Problem In Dynamic Nonlinear Models With Multiple Effects," Working Papers, CEMFI wp2006_0613, CEMFI.
  10. William Greene, 2001. "Fixed and Random Effects in Nonlinear Models," Working Papers, New York University, Leonard N. Stern School of Business, Department of Economics 01-01, New York University, Leonard N. Stern School of Business, Department of Economics.
  11. Chamberlain, G., 1993. "Feedback in Panel Data Medels," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 1656, Harvard - Institute of Economic Research.
  12. Jerry A. Hausman & Bronwyn H. Hall & Zvi Griliches, 1984. "Econometric Models for Count Data with an Application to the Patents-R&D Relationship," NBER Technical Working Papers, National Bureau of Economic Research, Inc 0017, National Bureau of Economic Research, Inc.
  13. Bester, C. Alan & Hansen, Christian, 2009. "A Penalty Function Approach to Bias Reduction in Nonlinear Panel Models with Fixed Effects," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 27(2), pages 131-148.
  14. Lancaster, Tony, 2002. "Orthogonal Parameters and Panel Data," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 69(3), pages 647-66, July.
  15. N. Sartori, 2003. "Modified profile likelihoods in models with stratum nuisance parameters," Biometrika, Biometrika Trust, Biometrika Trust, vol. 90(3), pages 533-549, September.
  16. Lancaster, Tony, 2000. "The incidental parameter problem since 1948," Journal of Econometrics, Elsevier, Elsevier, vol. 95(2), pages 391-413, April.
  17. Tony Lancaster, 2002. "Orthogonal Parameters and Panel Data," Review of Economic Studies, Oxford University Press, vol. 69(3), pages 647-666.
  18. Javier Alvarez & Manuel Arellano, 2004. "Robust Likelihood Estimation Of Dynamic Panel Data Models," Working Papers, CEMFI wp2004_0421, CEMFI.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:spo:wpmain:info:hdl:2441/eu4vqp9ompqllr09j0031f620. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Spire @ Sciences Po Library).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.