Bias corrections for probit and logit models with two-way fixed effects
Mario Cruz-Gonzalez
Department of Economics
Boston University
Boston, MA
[email protected]
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Iván Fernández-Val
Department of Economics
Boston University
Boston, MA
[email protected]
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Martin Weidner
Department of Economics
University College London
London, UK
[email protected]
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Abstract. In this article, we present the user-written commands probitfe and
logitfe, which fit probit and logit panel-data models with individual
and time unobserved effects. Fixed-effects panel-data methods that estimate the
unobserved effects can be severely biased because of the incidental parameter
problem (Neyman and Scott, 1948, Econometrica 16: 1–32). We tackle
this problem using the analytical and jackknife bias corrections derived in
Fernández-Val and Weidner (2016, Journal of Econometrics 192:
291–312) for panels where the two dimensions (N and T) are
moderately large. We illustrate the commands with an empirical application to
international trade and a Monte Carlo simulation calibrated to this
application.
View all articles by these authors:
Mario Cruz-Gonzalez, Iván Fernández-Val, Martin Weidner
View all articles with these keywords:
probitfe, logitfe, probit, logit, panel, fixed effects, bias corrections, incidental parameter problem
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