Avoiding biased versions of Wooldridge’s simple solution to the initial conditions problem

Wooldridge (2005) provided a simple and elegant solution to the initial conditions problem for dynamic nonlinear unobserved-effects models. His original auxiliary model includes the time-varying explanatory variables at each period. Unfortunately, a popular constrained version that includes within-means of the explanatory variables can be severely biased. We show that there are several ways to avoid this problem.

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Year of publication:	2013
Authors:	Rabe-Hesketh, Sophia ; Skrondal, Anders
Published in:	Economics Letters. - Elsevier, ISSN 0165-1765. - Vol. 120.2013, 2, p. 346-349
Publisher:	Elsevier
Subject:	Dynamic model \| Initial conditions \| Panel data \| Unbalanced panels

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Type of publication:	Article
Classification:	C23 - Models with Panel Data ; C25 - Discrete Regression and Qualitative Choice Models
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010678815