Estimating dynamic panel models : backing out the Nickell Bias

Jerry A. Hausman, Maxim L. Pinkovskiy

We propose a new estimator for the dynamic panel model, which solves the failure of strict exogeneity by calculating the bias in the first-order conditions as a function of the autoregressive parameter and solving the resulting equation. The estimator does well in a wide variety of situations where other estimators do not perform well: stationary initial condition, predetermined but not strictly exogenous regressors, and the presence of correlation between the error terms and the fixed effects. We also propose a general method for including predetermined variables in fixed-effects panel regressions.

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Year of publication:	30 November 2017
Authors:	Hausman, Jerry A. ; Pinkovskiy, Maxim L.
Publisher:	London : Cemmap, Centre for Microdata Methods and Practice, The Institute for Fiscal Studies, Department of Economics, UCL
Subject:	Panel \| Panel study \| Dynamische Ökonometrie \| Dynamic econometrics \| Fixed-Effects-Modell \| Fixed effects model