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Consistent estimation of linear panel data models with measurement error

Author:
Meijer, Erik, Spierdijk, Laura, Wansbeek, Tom
Source:
Journal of econometrics 2017 v.200 no.2 pp. 169-180
ISSN:
0304-4076
Subject:
econometric models, economic analysis, economic theory, equations, heteroskedasticity, regression analysis, variance covariance matrix
Abstract:
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.
Agid:
6107862