Jump to Main Content
Consistent estimation of linear panel data models with measurement error
- Meijer, Erik, Spierdijk, Laura, Wansbeek, Tom
- Journal of econometrics 2017 v.200 no.2 pp. 169-180
- econometric models, economic analysis, economic theory, equations, heteroskedasticity, regression analysis, variance covariance matrix
- Measurement error causes a bias towards zero when estimating a panel data linear regression model. The panel data context offers various opportunities to derive instrumental variables allowing for consistent estimation. We consider three sources of moment conditions: (i) restrictions on the covariance matrix of the errors in the equations, (ii) nonzero third moments of the regressors, and (iii) heteroskedasticity and nonlinearity in the relation between the error-ridden regressor and another, error-free, regressor. In simulations, these approaches appear to work well.