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We propose a new estimator for the dynamic panel model, which solves the failure of strict exogeneity by calculating the bias in the first-order conditions as a function of the autoregressive parameter and solving the resulting equation. The estimator does well in a wide variety of situations where other estimators do not perform well: stationary initial condition, predetermined but not strictly exogenous regressors, and the presence of correlation between the error terms and the fixed effects. We also propose a general method for including predetermined variables infixed-effects panel regressions.
Authors
MIT
Maxim L. Pinkovskiy
Working Paper details
- DOI
- 10.1920/wp.cem.2017.5317
- Publisher
- The IFS
Suggested citation
Hausman, J and Pinkovskiy, M. (2017). Estimating dynamic panel models: backing out the Nickell Bias. London: The IFS. Available at: https://ifs.org.uk/publications/estimating-dynamic-panel-models-backing-out-nickell-bias (accessed: 29 March 2024).
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