Fixed-effects Estimation and Decomposition: Insights from Monte Carlo Studies

Axel Heitmueller

United Kingdom Stata Users' Group Meetings 2005 from Stata Users Group

Abstract: In the presence of more readily available panel data the question arises whether standard decomposition techniques can be applied in the same spirit as in cross-section data. Monte Carlo studies show that employing a simple decomposition into explained and unexplained parts in the presence of time-invariant regressors using fixed-effects estimation will yield biased and inconsistent results. It is shown that this is not the case if the means in time-invariant variables of the respective groups are equal. Hence, it is argued that standard decomposition techniques are only transferable to fixed-effects estimation under certain stricter assumptions which are testable. This talk will outline these arguments, and discuss how the various decomposition techniques can be implemented in Stata.

Date: 2005-03-03
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http://repec.org/usug2005/Heitmueller-Stata_user_group05.pdf presentation slides (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:boc:usug05:08

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