Jackknife and analytical bias reduction for nonlinear panel models
Fixed effects estimators of panel models can be severely biased because of the well-known incidental parameters problem. We show that this bias can be reduced by using a panel jackknife or an analytical bias correction motivated by large T. We give bias corrections for averages over the fixed effects, as well as model parameters. We find large bias reductions from using these approaches in examples. We consider asymptotics where T grows with n, as an approximation to the properties of the estimators in econometric applications. We show that if T grows at the same rate as n the fixed effects estimator is asymptotically biased, so that asymptotic confidence intervals are incorrect, but that they are correct for the panel jackknife. We show T growing faster than n1/3 suffices for correctness of the analytic correction, a property we also conjecture for the jackknife.
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| Length: | 20 pp. |
| Date of creation: | 01 Oct 2003 |
| Handle: | RePEc:ifs:cemmap:17/03 |
| Contact details of provider: | Postal: The Institute for Fiscal Studies 7 Ridgmount Street LONDON WC1E 7AE Phone: (+44) 020 7291 4800 Fax: (+44) 020 7323 4780 Web page: http://cemmap.ifs.org.uk Email: More information through EDIRC
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| Order Information: | Postal: The Institute for Fiscal Studies 7 Ridgmount Street LONDON WC1E 7AE Email: |
References listed on IDEAS
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- Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-1426, November.
- Arellano, Manuel & Honore, Bo, 2001.
"Panel data models: some recent developments,"
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Elsevier.
- Arellano, M. & Honore, B., 2000. "Panel Data Models: Some Recent Developments," Papers 0016, Centro de Estudios Monetarios Y Financieros-.
- Jinyong Hahn & Guido Kuersteiner, 2002. "Asymptotically Unbiased Inference for a Dynamic Panel Model with Fixed Effects when Both "n" and "T" Are Large," Econometrica, Econometric Society, vol. 70(4), pages 1639-1657, July.
- Manski, Charles F, 1987. "Semiparametric Analysis of Random Effects Linear Models from Binary Panel Data," Econometrica, Econometric Society, vol. 55(2), pages 357-362, March.
- Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics,in: Z. Griliches†& M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier.
- Tiemen Woutersen, 2002. "Robustness against Incidental Parameters," UWO Department of Economics Working Papers 20028, University of Western Ontario, Department of Economics.
- Gary Chamberlain, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Oxford University Press, vol. 47(1), pages 225-238.
- White, Halbert, 1982. "Maximum Likelihood Estimation of Misspecified Models," Econometrica, Econometric Society, vol. 50(1), pages 1-25, January. Full references (including those not matched with items on IDEAS)
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