Avoiding biased versions of Wooldridge’s simple solution to the initial conditions problem

Sophia Rabe-Hesketh and Anders Skrondal

Economics Letters, 2013, vol. 120, issue 2, 346-349

Abstract: Wooldridge (2005) provided a simple and elegant solution to the initial conditions problem for dynamic nonlinear unobserved-effects models. His original auxiliary model includes the time-varying explanatory variables at each period. Unfortunately, a popular constrained version that includes within-means of the explanatory variables can be severely biased. We show that there are several ways to avoid this problem.

Keywords: Dynamic model; Initial conditions; Panel data; Unbalanced panels (search for similar items in EconPapers)
JEL-codes: C23 C25 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (124)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:120:y:2013:i:2:p:346-349

DOI: 10.1016/j.econlet.2013.05.009

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