Bias correction for within-group estimation of panel data models with fixed effects and sample selection

Chirok Han, Goeun Lee

Research output: Contribution to journalArticlepeer-review

Abstract

For linear panel data models with fixed effects and sample selection, we correct for selectivity bias in the within-group estimator. The proposed procedure is equivalent to a pooled weighted least squares based on pairwise differences augmented with correction terms. A computationally affordable method of estimating nuisance temporal correlation parameters in the selection equation errors is also proposed. Analytic standard errors are derived for the multi-step estimator. Our method is easier to implement and performs well in comparison to the minimum distance approach according to simulations.

Original languageEnglish
Article number110882
JournalEconomics Letters
Volume220
DOIs
Publication statusPublished - 2022 Nov

Bibliographical note

Funding Information:
We thank the Editor, Associate Editor, and two anonymous reviewers for their thoughtful comments. Codes are available at the corresponding author’s website. Research by Han was supported by Korea University ( K2108891 ).

Publisher Copyright:
© 2022 Elsevier B.V.

Keywords

  • Fixed effects
  • Pairwise differences
  • Sample selection
  • Weighted least squares
  • Within-group estimator

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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