Arbeitspapier
Robust standard errors in transformed likelihood estimation of dynamic panel data models
This paper extends the transformed maximum likelihood approach for estimation of dynamic panel data models by Hsiao, Pesaran, and Tahmiscioglu (2002) to the case where the errors are crosssectionally heteroskedastic. This extension is not trivial due to the incidental parameters problem that arises, and its implications for estimation and inference. We approach the problem by working with a mis-specified homoskedastic model. It is shown that the transformed maximum likelihood estimator continues to be consistent even in the presence of cross-sectional heteroskedasticity. We also obtain standard errors that are robust to cross-sectional heteroskedasticity of unknown form. By means of Monte Carlo simulation, we investigate the finite sample behavior of the transformed maximum likelihood estimator and compare it with various GMM estimators proposed in the literature. Simulation results reveal that, in terms of median absolute errors and accuracy of inference, the transformed likelihood estimator outperforms the GMM estimators in almost all cases.
- Language
-
Englisch
- Bibliographic citation
-
Series: IZA Discussion Papers ; No. 6583
- Classification
-
Wirtschaft
Hypothesis Testing: General
Estimation: General
Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models
- Subject
-
dynamic panels
cross-sectional heteroskedasticity
Monte Carlo simulation
GMM estimation
Panel
Maximum-Likelihood-Methode
Maßzahl
Robustes Verfahren
Vergleich
Momentenmethode
Theorie
- Event
-
Geistige Schöpfung
- (who)
-
Hayakawa, Kazuhiko
Pesaran, M. Hashem
- Event
-
Veröffentlichung
- (who)
-
Institute for the Study of Labor (IZA)
- (where)
-
Bonn
- (when)
-
2012
- Handle
- URN
-
urn:nbn:de:101:1-200911022246
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
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Object type
- Arbeitspapier
Associated
- Hayakawa, Kazuhiko
- Pesaran, M. Hashem
- Institute for the Study of Labor (IZA)
Time of origin
- 2012
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Robust Standard Errors in Transformed Likelihood Estimation of Dynamic Panel Data Models
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Unconditional Transformed Likelihood Estimation of Time-Space Dynamic Panel Data Models
Transformed Maximum Likelihood Estimation of Short Dynamic Panel Data Models with Interactive Effects
Robust likelihood ratio tests for incomplete economic models
The spectral maximum likelihood estimation of econometric models with stationary errors
Hollywood Transformed
Empirical likelihood methods for an AR(1) process with ARCH(1) errors
Essays on nonsampling errors in household panel surveys
Robust Bivariate Errors-in-Variables Regression and Outlier Detection
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