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Split-Panel Jackknife Estimation of Fixed-Effect Models

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  • Geert Dhaene
  • Koen Jochmans

    (Département d'économie)

Abstract

Maximum-likelihood estimation of nonlinear models with fixed effects is subject to the incidental-parameter problem. This typically implies that point estimates suffer from large bias and confidence intervals have poor coverage. This paper presents a jackknife method to reduce this bias and to obtain confidence intervals that are correctly centered under rectangular-array asymptotics. The method is explicitly designed to handle dynamics in the data and yields estimators that are straightforward to implement and that can be readily applied to a range of models and estimands. We provide distribution theory for estimators of index coefficients and average effects, present validity tests for the jackknife, and consider extensions to higher-order bias correction and to two-step estimation problems. An empirical illustration on female labor-force participation is also provided.

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Paper provided by Sciences Po in its series Sciences Po publications with number 2014-03.

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Date of creation: Mar 2014
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Handle: RePEc:spo:wpmain:info:hdl:2441/f6h8764enu2lskk9p2m9mgp8l

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Keywords: bias reduction; dependent data; incidental-parameter problem; jackknife; nonlinear model;

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Citations

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Cited by:
  1. Laura Hospido, 2007. "Modelling Heterogeneity And Dynamics In The Volatility Of Individual Wages," Working Papers, CEMFI wp2007_0717, CEMFI.
  2. Geert Dhaene & Koen Jochmans, 2011. "Profile-score Adjustements for Nonlinearfixed-effect Models," Sciences Po publications info:hdl:2441/eu4vqp9ompq, Sciences Po.
  3. Marcus J Chambers & Maria Kyriacou, 2010. "Jackknife Bias Reduction in the Presence of a Unit Root," Economics Discussion Papers, University of Essex, Department of Economics 685, University of Essex, Department of Economics.
  4. Dennis Kristensen & Bernard Salanié, 2010. "Higher Order Improvements for Approximate Estimators," CAM Working Papers, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics 2010-04, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
  5. Dennis Kristensen & Bernard Salanie, 2013. "Higher-order properties of approximate estimators," CeMMAP working papers, Centre for Microdata Methods and Practice, Institute for Fiscal Studies CWP45/13, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  6. Fernández-Val, Iván & Vella, Francis, 2007. "Bias Corrections for Two-Step Fixed Effects Panel Data Estimators," IZA Discussion Papers 2690, Institute for the Study of Labor (IZA).
  7. Alexander Chudik & M. Hashem Pesaran, 2013. "Large Panel Data Models with Cross-Sectional Dependence: A Survey," CESifo Working Paper Series 4371, CESifo Group Munich.
  8. Pesaran, Hashem & Chudik, Alexander, 2013. "Common Correlated Effects Estimation of Heterogeneous Dynamic Panel Data Models with Weakly Exogenous Regressors," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 1317, Faculty of Economics, University of Cambridge.
  9. repec:spo:wpecon:info:hdl:2441/eu4vqp9ompqllr09j0031f620 is not listed on IDEAS
  10. Alessandra Casarico & Paola Profeta & Chiara Pronzato, 2012. "On the local labor market determinants of female university enrolment in European regions," Carlo Alberto Notebooks, Collegio Carlo Alberto 278, Collegio Carlo Alberto.
  11. 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, Department of Economics, UC San Diego qt9gn6n5mr, Department of Economics, UC San Diego.
  12. 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.
  13. Iván Fernández-Val & Martin Weidner, 2013. "Individual and time effects in nonlinear panel models with large N,T," CeMMAP working papers, Centre for Microdata Methods and Practice, Institute for Fiscal Studies 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. Hyungsik Roger Moon & Martin Weidner, 2013. "Dynamic linear panel regression models with interactive fixed effects," CeMMAP working papers, Centre for Microdata Methods and Practice, Institute for Fiscal Studies CWP63/13, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.

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