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Dynamic panel probit: finite-sample performance of alternative random-effects estimators

Author

Listed:
  • Riccardo Lucchetti

    () (Di.S.E.S. - Universita' Politecnica delle Marche)

  • Claudia Pigini

    () (Di.S.E.S. - Universita' Politecnica delle Marche)

Abstract

Estimation of random-effects dynamic probit models for panel data entails the so-called "initial conditions problem". We argue that the relative finitesample performance of the two main competing solutions is driven by the magnitude of the individual unobserved heterogeneity and/or of the state dependence in the data. We investigate our conjecture by means of a comprehensive Monte Carlo experiment and offer useful indications for the practitioner.

Suggested Citation

  • Riccardo Lucchetti & Claudia Pigini, 2018. "Dynamic panel probit: finite-sample performance of alternative random-effects estimators," Working Papers 426, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  • Handle: RePEc:anc:wpaper:426
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    File URL: http://docs.dises.univpm.it/web/quaderni/pdf/426.pdf
    File Function: First version, 2018
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    References listed on IDEAS

    as
    1. Rabe-Hesketh, Sophia & Skrondal, Anders, 2013. "Avoiding biased versions of Wooldridge’s simple solution to the initial conditions problem," Economics Letters, Elsevier, vol. 120(2), pages 346-349.
    2. Francesco Bartolucci & Valentina Nigro, 2010. "A Dynamic Model for Binary Panel Data With Unobserved Heterogeneity Admitting a √n-Consistent Conditional Estimator," Econometrica, Econometric Society, vol. 78(2), pages 719-733, March.
    3. Anders Skrondal & Sophia Rabe-Hesketh, 2014. "Handling initial conditions and endogenous covariates in dynamic/transition models for binary data with unobserved heterogeneity," Journal of the Royal Statistical Society Series C, Royal Statistical Society, vol. 63(2), pages 211-237, February.
    4. 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.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Dynamic panel probit; panel data; Monte Carlo study;

    JEL classification:

    • 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; Probabilities

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