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Inference on time-invariant variables using panel data: a pretest estimator

Abstract : For static panel data models that include endogenous time-invariant variables corre- lated with individual e¤ects, exogenous averages over time of time-varying variables can be internal instruments. To pretest their exogeneity, we .rst estimate a random e¤ects model that includes all averages over time of time-varying variables (Mundlak, 1978; Kr- ishnakumar, 2006). Internal instruments are then selected if their parameter is statistically di¤erent from zero (Mundlak, 1978; Hausman and Taylor, 1981). Finally, we estimate a Hausman-Taylor (1981) model using these internal instruments. We then evaluate the bi- ases of currently used alternative estimators in a Monte-Carlo simulation: repeated between, ordinary least squares, two-stage restricted between, Oaxaca-Geisler estimator, .xed e¤ect vector decomposition, and random e¤ects (restricted generalized least squares).
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https://halshs.archives-ouvertes.fr/halshs-01719835
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Submitted on : Wednesday, January 27, 2021 - 10:13:42 AM
Last modification on : Friday, April 29, 2022 - 10:13:23 AM

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  • HAL Id : halshs-01719835, version 2

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Jean-Bernard Chatelain, Kirsten Ralf. Inference on time-invariant variables using panel data: a pretest estimator. 2021. ⟨halshs-01719835v2⟩

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