Finite Mixture for Panels with Fixed Effects
AbstractThis paper develops Â…nite mixture models with Â…xed effects for two families of distributions for which the incidental parameter problem has a solution. Analytical results are provided for mixtures of Normals and mixtures of Poisson. We provide algorithms based on the expectations-maximization (EM) approach as well as computationally simpler equivalent estimators that can be used in the case of the mixtures of normals. We design and implement a Monte Carlo study that examines the Â…nite sample performance of the proposed estimator and also compares it with other estimators such the Mundlak-Chamberlain conditionally correlated random eÂ¤ects estimator. The results of Monte Carlo experiments suggest that our proposed estimators of such models have excellent Â…nite sample properties, even in the case of relatively small T and moderately sized N dimensions. The methods are applied to models of healthcare expenditures and counts of utilization using data from the Health and Retirement Study.
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Bibliographic InfoPaper provided by HEDG, c/o Department of Economics, University of York in its series Health, Econometrics and Data Group (HEDG) Working Papers with number 11/03.
Date of creation: Apr 2011
Date of revision:
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Other versions of this item:
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy
- I1 - Health, Education, and Welfare - - Health
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