Panel data models with nonadditive unobserved heterogeneity: estimation and inference

DOI10.3982/QE75zbMATH Open1409.62249arXiv1206.2966OpenAlexW2963379035MaRDI QIDQ4645405FDOQ4645405

Authors: Iván Fernández-Val, Joonhwah Lee 

Publication date: 10 January 2019

Published in: Quantitative Economics (Search for Journal in Brave)

Abstract: This paper considers fixed effects estimation and inference in linear and nonlinear panel data models with random coefficients and endogenous regressors. The quantities of interest -- means, variances, and other moments of the random coefficients -- are estimated by cross sectional sample moments of GMM estimators applied separately to the time series of each individual. To deal with the incidental parameter problem introduced by the noise of the within-individual estimators in short panels, we develop bias corrections. These corrections are based on higher-order asymptotic expansions of the GMM estimators and produce improved point and interval estimates in moderately long panels. Under asymptotic sequences where the cross sectional and time series dimensions of the panel pass to infinity at the same rate, the uncorrected estimator has an asymptotic bias of the same order as the asymptotic variance. The bias corrections remove the bias without increasing variance. An empirical example on cigarette demand based on Becker, Grossman and Murphy (1994) shows significant heterogeneity in the price effect across U.S. states.

Full work available at URL: https://arxiv.org/abs/1206.2966

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zbMATH Keywords

momentsfixed effectspanel databiasinstrumental variablesGMMvariancesincidental parameter problemcigarette demandcorrelated random-coefficient model

Mathematics Subject Classification ID

Time series, auto-correlation, regression, etc. in statistics (GARCH) (62M10) Applications of statistics to economics (62P20)

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