Comparing Fixed Effects and Covariance Structure Estimators
Mette Ejrnæs and
Anders Holm ()
No 2004-02, CAM Working Papers from University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics
In this paper we compare the traditional econometric fixed effect/first difference estimator with the maximum likelihood estimator implied by covariance structure models for panel data. Our findings are that the maximum likelihood estimator is remarkable robust to mis-specifications, however in general the fixed estimator is preferable in small samples. Furthermore, we argue that we can use the Hausman test as a test of consistency of the maximum likelihood estimator. Finally we show that the covariance structure models is not identified in the case of time-invariant independent variables.
Pages: 17 pages
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Persistent link: https://EconPapers.repec.org/RePEc:kud:kuieca:2004_02
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