Bias corrections for probit and logit models with two-way fixed effects

Mario Cruz-Gonzalez (), Ivan Fernandez-Val and Martin Weidner
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Mario Cruz-Gonzalez: Boston University

Stata Journal, 2017, vol. 17, issue 3, 517-545

Abstract: In this article, we present the user-written commands probitfe and logitfe, which fit probit and logit panel-data models with individual and time unobserved effects. Fixed-effects panel-data methods that estimate the unobserved effects can be severely biased because of the incidental parameter problem (Ney- man and Scott, 1948, Econometrica 16: 1–32). We tackle this problem using the analytical and jackknife bias corrections derived in Fern ́andez-Val and Weidner (2016, Journal of Econometrics 192: 291–312) for panels where the two dimensions (N and T) are moderately large. We illustrate the commands with an empirical application to international trade and a Monte Carlo simulation calibrated to this application.

Keywords: probitfe; logitfe; probit; logit; panel; fixed effects; bias corrections; incidental parameter problem (search for similar items in EconPapers)
Date: 2017
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Working Paper: probitfe and logitfe: Bias corrections for probit and logit models with two-way fixed effects (2017)
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