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Make the Difference! computationally Trivial Estimators for Grouped Fixed Effects Models

Author

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  • Martin Mugnier

    (Department of Economics, CREST, ENSAE, Institut Polytechnique de Paris, France)

Abstract

Novel estimators are proposed for linear grouped fixed effects models. Rather than predicting a single grouping of units, they deliver a collection of groupings with the same flavor as the so-called LASSO regularization path. Mild conditions are found that ensure their asymptotic guarantees are the same as the so-called grouped fixed effects and post-spectral estimators (Bonhomme and Manresa, 2015; Chetverikov and Manresa, 2021). In contrast, the new estimators are computationally straigthforward and do not require prior knowledge of the number of groups. Monte Carlo simulations suggest good finite sample performance. Applying the approach to real data provides new insights on the potential network structure of the unobserved heterogeneity.

Suggested Citation

  • Martin Mugnier, 2022. "Make the Difference! computationally Trivial Estimators for Grouped Fixed Effects Models," Working Papers 2022-07, Center for Research in Economics and Statistics.
    • Handle: RePEc:crs:wpaper:2022-07
    as

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    References listed on IDEAS

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    3. Hyungsik Roger Moon & Martin Weidner, 2018. "Nuclear Norm Regularized Estimation of Panel Regression Models," Papers 1810.10987, arXiv.org, revised Jun 2023.
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    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Daniel J. Lewis & Davide Melcangi & Laura Pilossoph & Aidan Toner‐Rodgers, 2023. "Approximating grouped fixed effects estimation via fuzzy clustering regression," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 38(7), pages 1077-1084, November.
    2. Dmitry Arkhangelsky & Guido Imbens, 2023. "Causal Models for Longitudinal and Panel Data: A Survey," Papers 2311.15458, arXiv.org, revised Jun 2024.
    3. Thomas Wiemann, 2023. "Optimal Categorical Instrumental Variables," Papers 2311.17021, arXiv.org, revised May 2024.

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    More about this item

    Keywords

    panel data; grouped fixed effects; time-varying unobserved heterogeneity; k-means clustering;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

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