Fixed effects (FE) in panel data models overlap each other and prohibit the identification of the impact of ''constant'' regressors. Think of regressors that are constant across countries in a country-time panel with time FE. The traditional approach is to drop some FE and constant regressors by...

Several lessons learned from a Bayesian analysis of basic economic time series models by means of the Gibbs sampling algorithm are presented. Models include the Cochrane-Orcutt model for serial correlation, the Koyck distributed lag model, the Unit Root model, the Instrumental Variables model...

Mundlak (1978) proposed the addition of time averages to the usual panel equation in order to remove the fixed effects bias. We extend this Mundlak equation further by replacing the time-varying explanatory variables by the corresponding deviations from the averages over time, while keeping the...

Approximation formulae are developed for the bias of ordinary andgeneralized Least Squares Dummy Variable (LSDV) estimators in dynamicpanel data models. Results from Kiviet (1995, 1999) are extended tohigher-order dynamic panel data models with general covariancestructure. The focus is on...

Through Monte Carlo experiments the small sample behavior is examinedof various inference techniques for dynamic panel data models whenboth the time-series and cross-section dimensions of the data set aresmall. The LSDV technique and corrected versions of it are comparedwith IV and GMM...

This paper introduces a new estimator for the fixed effects dynamic panel data model withexogenous variables. This estimator does not share some of the drawbacks of recently developed IVand GMM estimators and has a good performance even in small samples. The nearly unbiased estimatoris derived...

Psychologists and sociologists usually interpret answers to happiness surveys as cardinal and comparableacross respondents (Kahneman et al. 1999). As a result, these social scientists run OLS regressionson happiness and changes in happiness. Economists, on the other hand, usually only assume...

The finite sample behaviour is analysed of particular least squares (LS) andmethod of moments (MM) estimators in panel data models with individual effectsand both a lagged dependent variabIe regressor and another explanatory variabIewhich may be affected by lagged feedbacks from the dependent...

The relative magnitudes are compared of successive terms in a higher-order asymptotic expansion of the bias of the LSDV estimator in dynamic panels. We find that the leading term accounts for the major part of the actual bias in small samples. This implies that bias correction procedures can be...

An attempt is made to set rules for a fair and fruitful competition between alternative inference methods based on their performance in simulation experiments. This leads to a list of eight methodologic aspirations. Against their background we criticize aspects of many simulation studies that...