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Iterative Bias Correction Procedures Revisited: A Small Scale Monte Carlo Study

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  • Arturas Juodis

Abstract

This paper considers estimation of general panel data models subject to the incidental parameter problem of Neyman and Scott (1948). Our main focus is on the finite sample behavior of analytical bias corrected Maximum Likelihood estimators as discussed in Hahn and Kuersteiner (2002), Hahn and Newey (2004) and Hahn and Kuersteiner (2011). As it is mentioned in Hahn and Newey (2004) and Arellano and Hahn (2006), in principle it is possible to iterate the bias formula to obtain an estimator that might have better finite sample properties than the one step estimator. In this paper we will investigate merits and limitations of iterative bias correction procedures in finite samples, by considering three examples: Panel AR(1), Panel VAR(1) and Static Panel Probit.

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  • Arturas Juodis, 2015. "Iterative Bias Correction Procedures Revisited: A Small Scale Monte Carlo Study," UvA-Econometrics Working Papers 15-02, Universiteit van Amsterdam, Dept. of Econometrics.
  • Handle: RePEc:ame:wpaper:1502
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    1. Binder, Michael & Hsiao, Cheng & Pesaran, M. Hashem, 2005. "Estimation And Inference In Short Panel Vector Autoregressions With Unit Roots And Cointegration," Econometric Theory, Cambridge University Press, vol. 21(04), pages 795-837, August.
    2. Maurice J.G. Bun & Martin A. Carree & Artūras Juodis, 2017. "On Maximum Likelihood Estimation of Dynamic Panel Data Models," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 79(4), pages 463-494, August.
    3. Geert Dhaene & Koen Jochmans, 2015. "Split-panel Jackknife Estimation of Fixed-effect Models," Review of Economic Studies, Oxford University Press, vol. 82(3), pages 991-1030.
    4. William Greene, 2004. "The behaviour of the maximum likelihood estimator of limited dependent variable models in the presence of fixed effects," Econometrics Journal, Royal Economic Society, vol. 7(1), pages 98-119, June.
    5. Hsiao, Cheng & Zhou, Qiankun, 2015. "Statistical inference for panel dynamic simultaneous equations models," Journal of Econometrics, Elsevier, vol. 189(2), pages 383-396.
    6. Kruiniger, Hugo, 2013. "Quasi ML estimation of the panel AR(1) model with arbitrary initial conditions," Journal of Econometrics, Elsevier, vol. 173(2), pages 175-188.
    7. Akashi, Kentaro & Kunitomo, Naoto, 2012. "Some properties of the LIML estimator in a dynamic panel structural equation," Journal of Econometrics, Elsevier, vol. 166(2), pages 167-183.
    8. G. Everaert, 2009. "Using Backward Means to Eliminate Individual Effects from Dynamic Panels," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 09/553, Ghent University, Faculty of Economics and Business Administration.
    9. Arturas Juodis, 2013. "First Difference Transformation in Panel VAR models: Robustness, Estimation and Inference," UvA-Econometrics Working Papers 13-06, Universiteit van Amsterdam, Dept. of Econometrics.
    10. Kiviet, Jan F., 1995. "On bias, inconsistency, and efficiency of various estimators in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 68(1), pages 53-78, July.
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