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Fixed Effect Estimation of Large T Panel Data Models

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  • Iv'an Fern'andez-Val
  • Martin Weidner

Abstract

This article reviews recent advances in fixed effect estimation of panel data models for long panels, where the number of time periods is relatively large. We focus on semiparametric models with unobserved individual and time effects, where the distribution of the outcome variable conditional on covariates and unobserved effects is specified parametrically, while the distribution of the unobserved effects is left unrestricted. Compared to existing reviews on long panels (Arellano and Hahn 2007; a section in Arellano and Bonhomme 2011) we discuss models with both individual and time effects, split-panel Jackknife bias corrections, unbalanced panels, distribution and quantile effects, and other extensions. Understanding and correcting the incidental parameter bias caused by the estimation of many fixed effects is our main focus, and the unifying theme is that the order of this bias is given by the simple formula p/n for all models discussed, with p the number of estimated parameters and n the total sample size.

Suggested Citation

  • Iv'an Fern'andez-Val & Martin Weidner, 2017. "Fixed Effect Estimation of Large T Panel Data Models," Papers 1709.08980, arXiv.org, revised Mar 2018.
  • Handle: RePEc:arx:papers:1709.08980
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    References listed on IDEAS

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    1. Hoderlein, Stefan & White, Halbert, 2012. "Nonparametric identification in nonseparable panel data models with generalized fixed effects," Journal of Econometrics, Elsevier, vol. 168(2), pages 300-314.
    2. Karyne B. Charbonneau, 2014. "Multiple Fixed Effects in Binary Response Panel Data Models," Staff Working Papers 14-17, Bank of Canada.
    3. Dhaene, Geert & Jochmans, Koen, 2016. "Likelihood Inference In An Autoregression With Fixed Effects," Econometric Theory, Cambridge University Press, vol. 32(05), pages 1178-1215, October.
    4. Jushan Bai, 2009. "Panel Data Models With Interactive Fixed Effects," Econometrica, Econometric Society, vol. 77(4), pages 1229-1279, July.
    5. Hahn, Jinyong & Kuersteiner, Guido, 2011. "Bias Reduction For Dynamic Nonlinear Panel Models With Fixed Effects," Econometric Theory, Cambridge University Press, vol. 27(06), pages 1152-1191, December.
    6. Chen, Mingli, 2016. "Estimation of Nonlinear Panel Models with Multiple Unobserved Effects," The Warwick Economics Research Paper Series (TWERPS) 1120, University of Warwick, Department of Economics.
    7. Joseph G. Altonji & Rosa L. Matzkin, 2005. "Cross Section and Panel Data Estimators for Nonseparable Models with Endogenous Regressors," Econometrica, Econometric Society, vol. 73(4), pages 1053-1102, July.
    8. Tiemen Woutersen, 2002. "Robustness against Incidental Parameters," UWO Department of Economics Working Papers 20028, University of Western Ontario, Department of Economics.
    9. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, March.
    10. Stammann, Amrei & Heiß, Florian & McFadden, Daniel, 2016. "Estimating Fixed Effects Logit Models with Large Panel Data," Annual Conference 2016 (Augsburg): Demographic Change 145837, Verein für Socialpolitik / German Economic Association.
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    1. repec:tei:journl:v:11:y:2018:i:3:p:57-64 is not listed on IDEAS
    2. Mingli Chen & Iv'an Fern'andez-Val & Martin Weidner, 2014. "Nonlinear Factor Models for Network and Panel Data," Papers 1412.5647, arXiv.org, revised Oct 2019.

    More about this item

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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