BOOTSTRAP AND k-STEP BOOTSTRAP BIAS CORRECTIONS FOR THE FIXED EFFECTS ESTIMATOR IN NONLINEAR PANEL DATA MODELS
Min Seong Kim and
Yixiao Sun ()
Econometric Theory, 2016, vol. 32, issue 6, 1523-1568
Because of the incidental parameters problem, the fixed effects maximum likelihood estimator in a nonlinear panel data model is in general inconsistent when the time series length T is short and fixed. Even if T approaches infinity but at a rate not faster than the cross sectional sample size n, the fixed effects estimator is still asymptotically biased. This paper proposes using the standard bootstrap and k-step bootstrap to correct the bias. We establish the asymptotic validity of the bootstrap bias corrections for both model parameters and average marginal effects. Our results apply to static models as well as some dynamic Markov models. Monte Carlo simulations show that our procedures are effective in reducing the bias of the fixed effects estimator and improving the coverage accuracy of the associated confidence interval.
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