Fixed Effects Bias in Panel Data Estimators
Hielke Buddelmeyer (),
Paul Jensen (),
Umut Oguzoglu () and
Elizabeth Webster ()
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Hielke Buddelmeyer: Melbourne Institute of Applied Economic and Social Research
No 3487, IZA Discussion Papers from Institute of Labor Economics (IZA)
Since little is known about the degree of bias in estimated fixed effects in panel data models, we run Monte Carlo simulations on a range of different estimators. We find that Anderson-Hsiao IV, Kiviet’s bias-corrected LSDV and GMM estimators all perform well in both short and long panels. However, OLS outperforms the other estimators when the following holds: the cross-section is small (N = 20), the time dimension is short (T = 5) and the coefficient on the lagged dependent variable is large (? = 0.8).
Keywords: fixed effects; panel data; LSDV; dynamic model (search for similar items in EconPapers)
JEL-codes: C23 O11 E00 (search for similar items in EconPapers)
Pages: 9 pages
New Economics Papers: this item is included in nep-ecm and nep-lab
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