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

Cruz-Gonzalez, M; Fernández-Val, I; Weidner, M; (2017) Bias corrections for probit and logit models with two-way fixed effects. The Stata Journal , 17 (3) pp. 517-545. Green open access

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Abstract

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: –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.

Type: Article
Title: Bias corrections for probit and logit models with two-way fixed effects
Open access status: An open access version is available from UCL Discovery
Publisher version: http://www.stata-journal.com/article.html?article=...
Language: English
Additional information: This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions. This article was published in www.stata-journal.com.
Keywords: st0001, probit, logit, panel, fixed effects, bias corrections, incidental parameter problem
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/1551672
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