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van Praag, Bernard M. S.
Year of Publication: 
Series/Report no.: 
IZA Discussion Papers 9345
Mundlak (1978) proposed the addition of time averages to the usual panel equation in order to remove the fixed effects bias. We extend this Mundlak equation further by replacing the time-varying explanatory variables by the corresponding deviations from the averages over time, while keeping the time averages in the equation. It appears that regression on this extended equation provides simultaneously the within and in-between estimator, while the pooled data estimator is a weighted average of the within and in-between estimator. In Section 3 we introduce observed and unobserved fixed effects In Section 4 we demonstrate that in this extended setup Probit estimation on panel data sets does not pose a specific problem. The usual software will do. In Section 5 we give an empirical example.
panel data estimation techniques
ordered probit
fixed effects estimator
within estimator
pooled regression
between estimator
Document Type: 
Working Paper

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