A bias-corrected fixed effects estimator for the dynamic panel data model with exogenous variables

Chihwa Kao, Long Liu and Rui Sun

Economics Letters, 2025, vol. 254, issue C

Abstract: In this paper, we propose a bias-corrected fixed-effects estimator for the dynamic panel data model with large n and T. It is easy to implement comparing to alternative approaches. We also extend this estimator to accommodate the unit-root case. Monte Carlo simulations show that our estimator yields results similar to the iterative bias-corrected estimator in Bun and Carree (2005) across many simulation setups, but with faster computational speed. An empirical application is also provided to demonstrate the practical benefits of our approach.

Keywords: Dynamic panel data; Bias-corrected estimator; Fixed effects; Exogenous variables (search for similar items in EconPapers)
JEL-codes: C01 C13 C23 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:254:y:2025:i:c:s0165176525002630

DOI: 10.1016/j.econlet.2025.112426

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