Estimation of random-effects dynamic probit models for panel data entails the so-called ``initial conditions problem''. We argue that the relative finite-sample performance of the two main competing solutions is driven by the magnitude of the individual unobserved heterogeneity and/or of the state dependence in the data. We investigate our conjecture by means of a comprehensive Monte Carlo experiment and offer useful indications for the practitioner.
Choice of solutions to the initial-conditions problem in dynamic panel probit models / Lucchetti, Riccardo; Pigini, Claudia. - ELETTRONICO. - 27:(2020), pp. 1-8.
Choice of solutions to the initial-conditions problem in dynamic panel probit models
Riccardo Lucchetti;Claudia Pigini
2020-01-01
Abstract
Estimation of random-effects dynamic probit models for panel data entails the so-called ``initial conditions problem''. We argue that the relative finite-sample performance of the two main competing solutions is driven by the magnitude of the individual unobserved heterogeneity and/or of the state dependence in the data. We investigate our conjecture by means of a comprehensive Monte Carlo experiment and offer useful indications for the practitioner.File in questo prodotto:
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