Bootstrap-based bias correction and inference for dynamic panels with fixed effects

In this article, we describe a new command, xtbcfe, that performs the iterative bootstrap-based bias correction for the fixed-effects estimator in dynamic panels proposed by Everaert and Pozzi (2007, Journal of Economic Dynamics and Control 31: 1160–1184). We first simplify the core of their algorithm by using the invariance principle and subsequently extend it to allow for unbalanced and higherorder dynamic panels. We implement various bootstrap error resampling schemes to account for general heteroskedasticity and contemporaneous cross-sectional dependence. Inference can be performed using a bootstrapped variance–covariance matrix or percentile intervals. Monte Carlo simulations show that the simplification of the original algorithm results in a further bias reduction for very small T. The Monte Carlo results also support the bootstrap-based bias correction in higher-order dynamic panels and panels with cross-sectional dependence. We illustrate the command with an empirical example estimating a dynamic labor–demand function.


Issue Date:
2015
Publication Type:
Journal Article
DOI and Other Identifiers:
Record Identifier:
https://ageconsearch.umn.edu/record/281325
ISSN:
1536-8634
Language:
English
Published in:
Stata Journal, 15, 4
Page range:
986-1018

Record appears in:



 Record created 2019-01-18, last modified 2020-10-28

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