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Bootstrap inference for fixed-effect models

Author

Listed:
  • Ayden Higgins

    (University of Oxford)

  • Koen Jochmans

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

The maximum-likelihood estimator of nonlinear panel data models with fixed effects is asymptotically biased under rectangular-array asymptotics. The literature has devoted substantial effort to devising methods that correct for this bias as a means to salvage standard inferential procedures. The chief purpose of this paper is to show that the (recursive, parametric) bootstrap replicates the asymptotic distribution of the (uncorrected) maximum-likelihood estimator and of the likelihood-ratio statistic. This justifies the use of confidence sets and decision rules for hypothesis testing constructed via conventional bootstrap methods. No modification for the presence of bias needs to be made.

Suggested Citation

  • Ayden Higgins & Koen Jochmans, 2024. "Bootstrap inference for fixed-effect models," Post-Print hal-04557288, HAL.
    • Handle: RePEc:hal:journl:hal-04557288
    DOI: 10.3982/ECTA20712
    Note: View the original document on HAL open archive server: https://hal.science/hal-04557288
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    References listed on IDEAS

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    Cited by:

    1. Giuseppe Cavaliere & S'ilvia Gonc{c}alves & Morten {O}rregaard Nielsen & Edoardo Zanelli, 2022. "Bootstrap inference in the presence of bias," Papers 2208.02028, arXiv.org, revised Nov 2023.
    2. Claudia Pigini & Alessandro Pionati & Francesco Valentini, 2023. "Specification testing with grouped fixed effects," Papers 2310.01950, arXiv.org.
    3. De Vos, Ignace & Stauskas, Ovidijus, 2024. "Cross-section bootstrap for CCE regressions," Journal of Econometrics, Elsevier, vol. 240(1).

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    More about this item

    Keywords

    Bootstrap; Fixed effects; Incidental-parameter problem; Inference; Panel data;
    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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