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A Simple Feasible Alternative Procedure to Estimate Models with High-Dimensional Fixed Effects

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  • Guimaraes, Paulo

    (Banco de Portugal)

  • Portugal, Pedro

    (Banco de Portugal)

Abstract

In this paper we describe an alternative iterative approach for the estimation of linear regression models with high-dimensional fixed-effects such as large employer-employee data sets. This approach is computationally intensive but imposes minimum memory requirements. We also show that the approach can be extended to non-linear models and potentially to more than two high dimensional fixed effects.

Suggested Citation

  • Guimaraes, Paulo & Portugal, Pedro, 2009. "A Simple Feasible Alternative Procedure to Estimate Models with High-Dimensional Fixed Effects," IZA Discussion Papers 3935, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp3935
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    References listed on IDEAS

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    1. Martyn Andrews & Thorsten Schank & Richard Upward, 2006. "Practical fixed-effects estimation methods for the three-way error-components model," Stata Journal, StataCorp LP, vol. 6(4), pages 461-481, December.
    2. John M. Abowd & Francis Kramarz & David N. Margolis, 1999. "High Wage Workers and High Wage Firms," Econometrica, Econometric Society, vol. 67(2), pages 251-334, March.
    3. 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.
    4. Paulo Guimaraes, 2004. "Understanding the multinomial-Poisson transformation," Stata Journal, StataCorp LP, vol. 4(3), pages 265-273, September.
    5. Paulo Guimarães & Pedro Portugal & Anabela Carneiro, 2009. "Real Wages and the Business Cycle: Accounting for Worker and Firm Heterogeneity," Working Papers w200910, Banco de Portugal, Economics and Research Department.
    6. Guimarães, Paulo, 2008. "The fixed effects negative binomial model revisited," Economics Letters, Elsevier, vol. 99(1), pages 63-66, April.
    7. Thomas Cornelissen, 2008. "The Stata command felsdvreg to fit a linear model with two high-dimensional fixed effects," Stata Journal, StataCorp LP, vol. 8(2), pages 170-189, June.
    8. John M. Abowd & Robert H. Creecy & Francis Kramarz, 2002. "Computing Person and Firm Effects Using Linked Longitudinal Employer-Employee Data," Longitudinal Employer-Household Dynamics Technical Papers 2002-06, Center for Economic Studies, U.S. Census Bureau.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    high dimensional fixed effects; linked employer-employee data;

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access

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