Avoiding biased versions of Wooldridge’s simple solution to the initial conditions problem

By Sophia Rabe-Hesketh, A. Skrondal. 2013

188 citations recorded by the source corpus.

Wooldridge (2005) provided a simple and elegant solution to the initial conditions problem for dynamic nonlinear unobserved-effects models. His original auxiliary model includes the time-varying explanatory variables at each period. Unfortunately, a popular constrained version that includes within-means of the explanatory variables can be severely biased. We show that there are several ways to avoid this problem.

Subfields: Economics and Econometrics, General Decision Sciences, Management Science and Operations Research

View Paper: https://www.semanticscholar.org/paper/5580a802bf6393d070b8ae9170ec2331cf29ed64