Choice of solutions to the initial-conditions problem in dynamic panel probit models

Riccardo (Jack) Lucchetti and Claudia Pigini

No 2020:27, Working Papers from Department of Economics, University of Venice "Ca' Foscari"

Abstract: Estimation of random-effects dynamic probit models for panel data entails the so-called "initial conditions problem". We argue that the relative finite-sample performance of the two main competing solutions is driven by the magnitude of the individual unobserved heterogeneity and/or of the state dependence in the data. We investigate our conjecture by means of a comprehensive Monte Carlo experiment and offer useful indications for the practitioner.

Keywords: Panel data; dynamic probit; initial conditions (search for similar items in EconPapers)
JEL-codes: C23 C25 (search for similar items in EconPapers)
Pages: 10 pages
Date: 2020
New Economics Papers: this item is included in nep-dcm, nep-ecm and nep-ore
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