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Bias correction for within-group estimation of panel data models with fixed effects and sample selection

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  • Han, Chirok
  • Lee, Goeun

Abstract

For linear panel data models with fixed effects and sample selection, we correct for selectivity bias in the within-group estimator. The proposed procedure is equivalent to a pooled weighted least squares based on pairwise differences augmented with correction terms. A computationally affordable method of estimating nuisance temporal correlation parameters in the selection equation errors is also proposed. Analytic standard errors are derived for the multi-step estimator. Our method is easier to implement and performs well in comparison to the minimum distance approach according to simulations.

Suggested Citation

  • Han, Chirok & Lee, Goeun, 2022. "Bias correction for within-group estimation of panel data models with fixed effects and sample selection," Economics Letters, Elsevier, vol. 220(C).
    • Handle: RePEc:eee:ecolet:v:220:y:2022:i:c:s0165176522003561
    DOI: 10.1016/j.econlet.2022.110882
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    References listed on IDEAS

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    More about this item

    Keywords

    Fixed effects; Sample selection; Within-group estimator; Weighted least squares; Pairwise differences;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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