Finite Mixture for Panels with Fixed Effects
This paper develops Â…nite mixture models with Â…xed effects for two families of distributions for which the incidental parameter problem has a solution. Analytical results are provided for mixtures of Normals and mixtures of Poisson. We provide algorithms based on the expectations-maximization (EM) approach as well as computationally simpler equivalent estimators that can be used in the case of the mixtures of normals. We design and implement a Monte Carlo study that examines the Â…nite sample performance of the proposed estimator and also compares it with other estimators such the Mundlak-Chamberlain conditionally correlated random eÂ¤ects estimator. The results of Monte Carlo experiments suggest that our proposed estimators of such models have excellent Â…nite sample properties, even in the case of relatively small T and moderately sized N dimensions. The methods are applied to models of healthcare expenditures and counts of utilization using data from the Health and Retirement Study.
|Date of creation:||Apr 2011|
|Date of revision:|
|Contact details of provider:|| Postal: HEDG/HERC, Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom|
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Web page: http://www.york.ac.uk/economics/postgrad/herc/hedg/
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"The Impact of Nearly Universal Insurance Coverage on Health Care Utilization and Health: Evidence from Medicare,"
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"Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity,"
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John Wiley & Sons, Ltd., vol. 20(1), pages 39-54.
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- Partha Deb & Karen Smith Conway, 2002.
"Is Prenatal Care Really Ineffective? Or, is the 'Devil' in the Distribution?,"
Economics Working Paper Archive at Hunter College
02/2, Hunter College Department of Economics.
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- Anders Skrondal & Sophia Rabe-Hesketh, 2007. "Latent Variable Modelling: A Survey," Scandinavian Journal of Statistics, Danish Society for Theoretical Statistics;Finnish Statistical Society;Norwegian Statistical Association;Swedish Statistical Association, vol. 34(4), pages 712-745.
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