Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/281101 
Year of Publication: 
2023
Series/Report no.: 
Queen’s Economics Department Working Paper No. 1497
Publisher: 
Queen's University, Department of Economics, Kingston (Ontario)
Abstract: 
We provide a systematic approach in obtaining an estimator asymptotically more efficient than the popular fixed effects Poisson (FEP) estimator for panel data models with multiplicative heterogeneity in the conditional mean. In particular, we derive the optimal instrumental variables under appealing "working" second moment assumptions that allow underdispersion, overdispersion, and general patterns of serial correlation. Because parameters in the optimal instruments must be estimated, we argue for combining our new moment conditions with those that define the FEP estimator to obtain a generalized method of moments (GMM) estimator no less efficient than the FEP estimator and the estimator using the new instruments. A simulation study shows that the overidentfied GMM estimator behaves well in terms of bias and it often delivers nontrivial efficiency gains - even when the working second-moment assumptions fail. We apply the new estimator to modeling firm patent filings and spending on R&D, and find nontrivial reductions in standard errors using the new estimator.
Subjects: 
Fixed effects Poisson
serial correlation
optimal instruments
generalized method of moments
JEL: 
C23
Document Type: 
Working Paper

Files in This Item:
File
Size
297.57 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.