Estimating dynamic panel models: backing out the Nickell Bias

Jerry Hausman () and Maxim L. Pinkovskiy
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Jerry Hausman: Institute for Fiscal Studies and MIT
Maxim L. Pinkovskiy: Institute for Fiscal Studies

No CWP53/17, CeMMAP working papers from Centre for Microdata Methods and Practice, Institute for Fiscal Studies

Abstract: We propose a new estimator for the dynamic panel model, which solves the failure of strict exogeneity by calculating the bias in the first-order conditions as a function of the autoregressive parameter and solving the resulting equation. The estimator does well in a wide variety of situations where other estimators do not perform well: stationary initial condition, predetermined but not strictly exogenous regressors, and the presence of correlation between the error terms and the fixed effects. We also propose a general method for including predetermined variables infixed-effects panel regressions.

JEL-codes: C01 C22 C23 (search for similar items in EconPapers)
Date: 2017-11-30
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Citations: View citations in EconPapers (2)

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