Bias corrections for probit and logit models with two-way fixed effects

• Autores: Mario Cruz Gonzalez, Iván Fernández Val, Martin Weidner
• Localización: The Stata journal, ISSN 1536-867X, Vol. 17, Nº. 3, 2017, págs. 517-545
• Idioma: inglés
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• Resumen

  • In this article, we present the user-written commands probitfe and logitfe, which fit probit and logit panel-data models with individual and time unobserved effects. Fixed-effects panel-data methods that estimate the unobserved effects can be severely biased because of the incidental parameter problem (Neyman and Scott, 1948, Econometrica 16: 1–32). We tackle this problem using the analytical and jackknife bias corrections derived in Fernández-Val and Weidner (2016, Journal of Econometrics 192: 291–312) for panels where the two dimensions (N and T) are moderately large. We illustrate the commands with an empirical application to international trade and a Monte Carlo simulation calibrated to this application.