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Understanding Bias in Nonlinear Panel Models: Some Recent Developments

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  • Manuel Arellano
  • Jinyong Hahn
Abstract
The purpose of this paper is to review recently developed methods of estimation of nonlinear fixed effects panel data models with reduced bias properties. We begin by describing fixed effects estimators and the incidental parameters problem. Next we explain how to construct analytical bias correction of estimators, followed by bias correction of the moment equation, and bias corrections for the concentrated likelihood. We then turn to discuss other approaches leading to bias correction based on orthogonalization and their extensions. The remaining sections consider quasi maximum likelihood estimation for dynamic models, the estimation of marginal effects, and automatic methods based on simulation.

Suggested Citation

  • Manuel Arellano & Jinyong Hahn, 2005. "Understanding Bias in Nonlinear Panel Models: Some Recent Developments," Working Papers wp2005_0507, CEMFI.
    • Handle: RePEc:cmf:wpaper:wp2005_0507
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    References listed on IDEAS

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    1. Manuel Arellano, 2003. "Discrete choices with panel data," Investigaciones Economicas, Fundación SEPI, vol. 27(3), pages 423-458, September.
    2. Carro, Jesus M., 2007. "Estimating dynamic panel data discrete choice models with fixed effects," Journal of Econometrics, Elsevier, vol. 140(2), pages 503-528, October.
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    6. Thomas A. Severini, 2002. "Modified estimating functions," Biometrika, Biometrika Trust, vol. 89(2), pages 333-343, June.
    7. Hahn, Jinyong, 2001. "The Information Bound Of A Dynamic Panel Logit Model With Fixed Effects," Econometric Theory, Cambridge University Press, vol. 17(5), pages 913-932, October.
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    12. Tony Lancaster, 2002. "Orthogonal Parameters and Panel Data," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(3), pages 647-666.
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    13. Galvao Jr, A. F. & Montes-Rojas, G., 2009. "Instrumental variables quantile regression for panel data with measurement errors," Working Papers 09/06, Department of Economics, City University London.
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    15. Contoyannis, Paul & Li, Jinhu, 2011. "The evolution of health outcomes from childhood to adolescence," Journal of Health Economics, Elsevier, vol. 30(1), pages 11-32, January.
    16. Xiaoming Li, 2011. "Fixed Effects Estimation in Panel Nonlinear Fractional Response Models," Working papers 2011-11, University of Connecticut, Department of Economics.
    17. Aleix Calveras & Juan-José Ganuza & Gerard Llobet, 2005. "Regulation and Opportunism: How Much Activism Do We Need?," Working Papers wp2005_0508, CEMFI.
    18. Wang, Xichen & Yan, Ji (Karena) & Yan, Cheng & Gozgor, Giray, 2021. "Emerging stock market exuberance and international short-term flows," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 75(C).
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