Robustness Against Incidental Parameters and Mixing Distributions
AbstractNeyman and Scott (1948) define the incidental parameter problem. In panel data with T observations per individual and unobservable individual- specific effects, the inconsistency of the maximum likelihood estimator of the common parameters is in general of the order 1/T. This paper considers the integrated likelihood estimator and develops the integrated moment estimator. It shows that the inconsistency of the integrated likelihood estimator reduces from 1/T to 1/T2 if an information orthogonal parametrization is used. It derives information orthogonal moment functions for the general linear model and the index model with weakly exogenous regressors and thereby offers an approximate solution for the incidental parameter problem for a wide range of models. It argues that reparametrizations are easier in a Bayesian framework and shows how to use the 1/T2- result to increase the robustness against the choice of mixing distribution. The integrated likelihood estimator is consistent and adaptive for asympototics in which T proportional to N to the power alpha where alpha is larger than 1/3. The paper also shows that likelihood methods that use sufficient statistics for the individual-specific effects can be viewed as a special case of the integrated likelihood estimator.
Download InfoIf 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.
Bibliographic InfoPaper provided by University of Western Ontario, Department of Economics in its series UWO Department of Economics Working Papers with number 200110.
Date of creation: 2001
Date of revision:
Contact details of provider:
Postal: Department of Economics, Reference Centre, Social Science Centre, University of Western Ontario, London, Ontario, Canada N6A 5C2
Phone: 519-661-2111 Ext.85244
Web page: http://economics.uwo.ca/research/research_papers/department_working_papers.html
This paper has been announced in the following NEP Reports:
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Carro, Jesus M., 2007. "Estimating dynamic panel data discrete choice models with fixed effects," Journal of Econometrics, Elsevier, vol. 140(2), pages 503-528, October.
- Arellano, M., 2001.
"Discrete Choices with Panel Data,"
0101, Centro de Estudios Monetarios Y Financieros-.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.