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Comparing Fixed Effects and Covariance Structure Estimators for Panel Data

Author

Listed:
  • Mette Ejrnæs
  • Anders Holm

    (University of Copenhagen, Denmark)

Abstract

In this article, the authors compare the traditional econometric fixed effect estimator with the maximum likelihood estimator implied by covariance structure models for panel data. Their findings are that the maximum like lipoid estimator is remarkably robust to certain types of misspecifications (e.g., deviation from the assumption of an underlying normal distribution). However, with other types of misspecification, the fixed estimator is pre ferable. Furthermore, the authors suggest that the Hausman specification test may be used as a test of the consistency of the maximum likelihood estimator.

Suggested Citation

  • Mette Ejrnæs & Anders Holm, 2006. "Comparing Fixed Effects and Covariance Structure Estimators for Panel Data," Sociological Methods & Research, , vol. 35(1), pages 61-83, August.
    • Handle: RePEc:sae:somere:v:35:y:2006:i:1:p:61-83
    DOI: 10.1177/0049124106289109
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    References listed on IDEAS

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    1. P. Diggle & M. G. Kenward, 1994. "Informative Drop‐Out in Longitudinal Data Analysis," Journal of the Royal Statistical Society Series C, Royal Statistical Society, vol. 43(1), pages 49-73, March.
    2. Jerry Hausman, 2015. "Specification tests in econometrics," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 38(2), pages 112-134.
    3. Jay Teachman & Greg J. Duncan & W. Jean Yeung & Dan Levy, 2001. "Covariance Structure Models for Fixed and Random Effects," Sociological Methods & Research, , vol. 30(2), pages 271-288, November.
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