Fixed and random effects in nonlinear panel data model: A discussion of a paper by Manuel Arellano and Jinyong Hahn

Research output: Chapter in Book/Report/Conference proceedingChapter

Abstract

INTRODUCTION It was a pleasure to serve as the discussant for this session. The authors have played a major role in developing the area under discussion. The paper is very good so that my role is to comment rather than criticize. I will discuss a connection between reducing the estimation bias in a fixed effects model versus reducing misspecification bias in a random effects model. For this discussion, I use the framework of Woutersen (2002). Woutersen (2002) proposes to use a moment that approximately separates the parameter of interest from the individual parameters. Let zi denote that data on individual i, let αi be the individual parameter and let θ be the common parameter. Then, for any likelihood model, a moment function g (α, θ) = σi g i (α, θ, z i)/N can be constructed with the properties (i) Eg (α0, θ0) = 0 where {α0, θ0} denote the true parameter values and (ii) Eg αi (α0, θ0) = 0 for all i, that is, the partial derivative of the moment function with respect to αi is zero for all i. Condition (ii) means that the moment function depends somewhat less on α. The moment function g (α, θ) is then integrated with respect to the likelihood L i (α, θ) and the prior π(αi;θ), Inference is then based on the integrated moment by minimizing with respect to θ.

Original languageEnglish (US)
Title of host publicationAdvances in Economics and Econometrics
Subtitle of host publicationTheory and Applications, Ninth World Congress, Volume III
PublisherCambridge University Press
Pages410-412
Number of pages3
Volume9780521871549
ISBN (Electronic)9780511607547
ISBN (Print)0521871522, 9780521871549
DOIs
StatePublished - Jan 1 2010
Externally publishedYes

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

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    Woutersen, T. M. (2010). Fixed and random effects in nonlinear panel data model: A discussion of a paper by Manuel Arellano and Jinyong Hahn. In Advances in Economics and Econometrics: Theory and Applications, Ninth World Congress, Volume III (Vol. 9780521871549, pp. 410-412). Cambridge University Press. https://doi.org/10.1017/CBO9780511607547.014