Finite Mixture for Panels with Fixed Effects

Partha Deb and Pravin Trivedi

Health, Econometrics and Data Group (HEDG) Working Papers from HEDG, c/o Department of Economics, University of York

Abstract: This paper develops …nite mixture models with …xed effects for two families of distributions for which the incidental parameter problem has a solution. Analytical results are provided for mixtures of Normals and mixtures of Poisson. We provide algorithms based on the expectations-maximization (EM) approach as well as computationally simpler equivalent estimators that can be used in the case of the mixtures of normals. We design and implement a Monte Carlo study that examines the …nite sample performance of the proposed estimator and also compares it with other estimators such the Mundlak-Chamberlain conditionally correlated random e¤ects estimator. The results of Monte Carlo experiments suggest that our proposed estimators of such models have excellent …nite sample properties, even in the case of relatively small T and moderately sized N dimensions. The methods are applied to models of healthcare expenditures and counts of utilization using data from the Health and Retirement Study.

Date: 2011-04
New Economics Papers: this item is included in nep-ecm
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Finite Mixture for Panels with Fixed Effects (2013)
Working Paper: Finite Mixture for Panels with Fixed Effects (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:yor:hectdg:11/03

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