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Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity
Author(s) -
Wooldridge Jeffrey M.
Publication year - 2005
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/jae.770
Subject(s) - estimator , econometrics , tobit model , simple (philosophy) , probit , poisson distribution , nonlinear system , probit model , conditional probability distribution , mathematics , panel data , distribution (mathematics) , statistics , mathematical analysis , philosophy , physics , epistemology , quantum mechanics
I study a simple, widely applicable approach to handling the initial conditions problem in dynamic, nonlinear unobserved effects models. Rather than attempting to obtain the joint distribution of all outcomes of the endogenous variables, I propose finding the distribution conditional on the initial value (and the observed history of strictly exogenous explanatory variables). The approach is flexible, and results in simple estimation strategies for at least three leading dynamic, nonlinear models: probit, Tobit and Poisson regression. I treat the general problem of estimating average partial effects, and show that simple estimators exist for important special cases. Copyright © 2005 John Wiley & Sons, Ltd.