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Non linear correlated random effects models with endogeneity and unbalanced panels

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  • Michael D. Bates
  • Leslie E. Papke
  • Jeffrey M. Wooldridge

Abstract

We present simple procedures for estimating non linear panel data models in the presence of unobserved heterogeneity and possible endogeneity with respect to time-varying unobservables. We combine a correlated random effects approach with a control function approach while accounting for missing time periods for some units. We examine the performance of the approach in comparisons with standard estimators using Monte Carlo simulation. We apply the methods to estimate the effects of school spending on student pass rates on a standardized math exam. We find that a 10% increase in spending leads to an approximately 2 percentage point increase in math pass rates.

Suggested Citation

  • Michael D. Bates & Leslie E. Papke & Jeffrey M. Wooldridge, 2024. "Non linear correlated random effects models with endogeneity and unbalanced panels," Econometric Reviews, Taylor & Francis Journals, vol. 43(9), pages 713-732, October.
    • Handle: RePEc:taf:emetrv:v:43:y:2024:i:9:p:713-732
    DOI: 10.1080/07474938.2024.2357431
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    More about this item

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education

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