Estimating Dynamic Panel Models: Backing Out the Nickell Bias
25 Pages Posted: 7 Nov 2017
Date Written: 2017-10-01
We propose a novel 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. We show that this estimator performs well as compared with approaches in current use. We also propose a general method for including predetermined variables in fixed-effects panel regressions that appears to perform well.
Keywords: dynamic panel data, bias correction, econometrics
JEL Classification: C2, C23, C26
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