IDEAS home Printed from https://ideas.repec.org/p/drx/wpaper/202611.html

Instrumental-Variable Poisson PML with High-Dimensional Fixed Effects

Author

Listed:
  • Ohyun Kwon

    (School of Economics, Drexel University)

  • Mario Larch

    (University of Bayreuth)

  • Jangsu Yoon

    (Department of Economics, University of Kentucky)

  • Yoto Yotov

    (School of Economics, Drexel University)

Abstract

We implement an instrumental-variable Poisson pseudo-maximum likelihood estimator with high-dimensional fixed effects (IV-PPML-HDFE). To correct for incidental parameter bias, we use a split-panel jackknife (SPJ) routine with bootstrapped standard errors. Monte Carlo simulations across the three most common fixed-effect structures confirm that SPJ reduces the mean absolute bias by 42% and raises mean bootstrap confidence-interval coverage from 69% to 92%. We provide a robust and user-friendly ‘ivppmlhdfe’ package, and deploy it in three empirical applications to establish the validity and usefulness of our methods.

Suggested Citation

  • Ohyun Kwon & Mario Larch & Jangsu Yoon & Yoto Yotov, 2026. "Instrumental-Variable Poisson PML with High-Dimensional Fixed Effects," Working Papers 202611, Center for Global Policy Analysis, LeBow College of Business, Drexel University.
    • Handle: RePEc:drx:wpaper:202611
    as

    Download full text from publisher

    File URL: https://www.lebow.drexel.edu/sites/default/files/2026-04/cgpa_paper_2026_11-instrumental-variable.pdf
    File Function: First version, 2026
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. J. M. C. Santos Silva & Silvana Tenreyro, 2022. "The Log of Gravity at 15," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 21(3), pages 423-437, September.
    2. Daniele Curzi & Martijn Huysmans, 2022. "The Impact of Protecting EU Geographical Indications in Trade Agreements," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(1), pages 364-384, January.
    3. Cohn, Jonathan B. & Liu, Zack & Wardlaw, Malcolm I., 2022. "Count (and count-like) data in finance," Journal of Financial Economics, Elsevier, vol. 146(2), pages 529-551.
    4. Iván Fernández‐Val & Joonhwah Lee, 2013. "Panel data models with nonadditive unobserved heterogeneity: Estimation and inference," Quantitative Economics, Econometric Society, vol. 4(3), pages 453-481, November.
    5. Peter Egger & Mario Larch & Kevin E. Staub & Rainer Winkelmann, 2011. "The Trade Effects of Endogenous Preferential Trade Agreements," American Economic Journal: Economic Policy, American Economic Association, vol. 3(3), pages 113-143, August.
    6. Larch, Mario & Wanner, Joschka & Yotov, Yoto V., 2018. "Bi- and Unilateral trade effects of joining the Euro," Economics Letters, Elsevier, vol. 171(C), pages 230-234.
    7. Jacques Poot & Omoniyi Alimi & Michael P. Cameron & David C. Maré, 2016. "The gravity model of migration: the successful comeback of an ageing superstar in regional science," INVESTIGACIONES REGIONALES - Journal of REGIONAL RESEARCH, Asociación Española de Ciencia Regional, issue 36, pages 63-86.
    8. Federico Carril-Caccia & Juliette Milgram-Baleix & Jordi Paniagua, 2023. "Does Terrorism Affect Foreign Greenfield Investments?," Defence and Peace Economics, Taylor & Francis Journals, vol. 34(6), pages 827-844, August.
    9. Mario Larch & Serge Shikher & Yoto V. Yotov, 2025. "Estimating Gravity Equations: Theory Implications, Econometric Developments, and Practical Recommendations," Review of International Economics, Wiley Blackwell, vol. 33(5), pages 1066-1092, November.
    10. Koen Jochmans & Vincenzo Verardi, 2022. "Instrumental‐variable estimation of exponential‐regression models with two‐way fixed effects with an application to gravity equations," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 37(6), pages 1121-1137, September.
    11. Sergio Correia & Paulo Guimarães & Tom Zylkin, 2020. "Fast Poisson estimation with high-dimensional fixed effects," Stata Journal, StataCorp LLC, vol. 20(1), pages 95-115, March.
    12. Jonathan I. Dingel & Felix Tintelnot, 2026. "Spatial Economics for Granular Settings," Econometrica, Econometric Society, vol. 94(2), pages 407-464, March.
    13. Weidner, Martin & Zylkin, Thomas, 2021. "Bias and consistency in three-way gravity models," Journal of International Economics, Elsevier, vol. 132(C).
    14. Fernández-Val, Iván & Weidner, Martin, 2016. "Individual and time effects in nonlinear panel models with large N, T," Journal of Econometrics, Elsevier, vol. 192(1), pages 291-312.
    15. Bergstrand, Jeffrey H. & Egger, Peter, 2007. "A knowledge-and-physical-capital model of international trade flows, foreign direct investment, and multinational enterprises," Journal of International Economics, Elsevier, vol. 73(2), pages 278-308, November.
    16. Tenreyro, Silvana, 2007. "On the trade impact of nominal exchange rate volatility," Journal of Development Economics, Elsevier, vol. 82(2), pages 485-508, March.
    17. Kinne, Brandon J, 2013. "Network Dynamics and the Evolution of International Cooperation," American Political Science Review, Cambridge University Press, vol. 107(4), pages 766-785, November.
    18. John Mullahy, 1997. "Instrumental-Variable Estimation Of Count Data Models: Applications To Models Of Cigarette Smoking Behavior," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 586-593, November.
    19. repec:boc:pcon20:13 is not listed on IDEAS
    20. G. Andrew Karolyi & Alvaro G. Taboada, 2015. "Regulatory Arbitrage and Cross‐Border Bank Acquisitions," Journal of Finance, American Finance Association, vol. 70(6), pages 2395-2450, December.
    21. Jiafeng Chen & Jonathan Roth, 2024. "Logs with Zeros? Some Problems and Solutions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 139(2), pages 891-936.
    22. Mario Larch & Yoto V Yotov, 2025. "Deep Trade Agreements and FDI in Partial and General Equilibrium: A Structural Estimation Framework," The World Bank Economic Review, World Bank, vol. 39(2), pages 281-307.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yoto V. Yotov, 2024. "The evolution of structural gravity: The workhorse model of trade," Contemporary Economic Policy, Western Economic Association International, vol. 42(4), pages 578-603, October.
    2. Koen Jochmans & Vincenzo Verardi, 2022. "Instrumental‐variable estimation of exponential‐regression models with two‐way fixed effects with an application to gravity equations," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 37(6), pages 1121-1137, September.
    3. Agostino Capponi & Zhaonan Qu, 2025. "Handling Sparse Non-negative Data in Finance," Papers 2509.01478, arXiv.org.
    4. J. M. C. Santos Silva & Silvana Tenreyro, 2022. "The Log of Gravity at 15," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 21(3), pages 423-437, September.
    5. Kox, Henk L.M., 2026. "Foreign direct investment and the gravity of knowledge," MPRA Paper 129069, University Library of Munich, Germany.
    6. Mario Larch & Yoto V. Yotov, 2024. "Estimating the effects of trade agreements: Lessons from 60 years of methods and data," The World Economy, Wiley Blackwell, vol. 47(5), pages 1771-1799, May.
    7. Matteo Aquilina & Giulio Cornelli & Marina Sanchez del Villar, 2024. "Regulation, information asymmetries and the funding of new ventures," BIS Working Papers 1162, Bank for International Settlements.
    8. Yang, Zhijiu & Ding, Hai, 2024. "Turning a blind eye: How local government fiscal distress affects the entry of energy-intensive enterprises," Energy Economics, Elsevier, vol. 138(C).
    9. Kox, Henk L.M., 2022. "A micro-macro model of foreign direct investment: knowledge-based gravity forces, self-selection and third-country effects," MPRA Paper 115542, University Library of Munich, Germany.
    10. Kox, Henk L.M., 2022. "Explaining foreign direct investment patterns: a testable micro-macro gravity model for FDI," MPRA Paper 115273, University Library of Munich, Germany.
    11. Weidner, Martin & Zylkin, Thomas, 2021. "Bias and consistency in three-way gravity models," Journal of International Economics, Elsevier, vol. 132(C).
    12. Morellini, Micol Matilde, 2025. "A Simulation Approach for the Spatial Testing of Migration Theories," OSF Preprints 98d2a_v1, Center for Open Science.
    13. Micol Matilde Morellini, 2026. "A Simulation Approach for the Spatial Testing of Migration Theories," European Journal of Population, Springer;European Association for Population Studies, vol. 42(1), pages 1-40, December.
    14. Sachdeva, Kunal & Silva, André F. & Slutzky, Pablo & Xu, Billy Y., 2025. "Defunding controversial industries: Can targeted credit rationing choke firms?," Journal of Financial Economics, Elsevier, vol. 172(C).
    15. Jeffrey H. Bergstrand & Jordi Paniagua, 2024. "Do Deep Trade Agreements’ Provisions Actually Increase – or Decrease – Trade and/or FDI?," CESifo Working Paper Series 11526, CESifo.
    16. Amberger, Harald J. & Wilde, Jaron H. & Wu, Yuchen, 2025. "Cross-border investment, deterrence, and compliance effects of ownership transparency," Journal of Accounting and Economics, Elsevier, vol. 80(2).
    17. Mariam Camarero & Laura Montolio & Cecilio Tamarit, 2022. "Explaining German outward FDI in the EU: a reassessment using Bayesian model averaging and GLM estimators," Empirical Economics, Springer, vol. 62(2), pages 487-511, February.
    18. Jochmans, Koen, 2022. "Bias in instrumental-variable estimators of fixed-effect models for count data," Economics Letters, Elsevier, vol. 212(C).
    19. Cohn, Jonathan B. & Liu, Zack & Wardlaw, Malcolm I., 2022. "Count (and count-like) data in finance," Journal of Financial Economics, Elsevier, vol. 146(2), pages 529-551.
    20. Hinz, Julian & Stammann, Amrei & Wanner, Joschka, 2019. "Persistent zeros: The extensive margin of trade," Kiel Working Papers 2139, Kiel Institute for the World Economy.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:drx:wpaper:202611. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Yoto V. Yotov (email available below). General contact details of provider: https://edirc.repec.org/data/cgdreus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.