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Binarization for panel models with fixed effects

Author

Listed:
  • Irene Botosaru

    (Institute for Fiscal Studies)

  • Chris Muris

    (Institute for Fiscal Studies and Simon Fraser University)

Abstract
In nonlinear panel models with fixed effects and fixed-T, the incidental parameter problem poses identification difficulties for structural parameters and partial effects. Existing solutions are model-specific, likelihood-based, impose time homogeneity, or restrict the distribution of unobserved heterogeneity. We provide new identification results for the large class of Fixed Effects Linear Transformation (FELT) models with unknown, time-varying, weakly monotone transformation functions. Our results accommodate continuous and discrete outcomes and covariates, require only two time periods and no parametric distributional assumptions. First, we provide a systematic solution to the incidental parameter problem in FELT via binarization, which transforms FELT into many binary choice models. Second, we identify the distribution of counterfactual outcomes and a menu of time-varying partial effects. Third, we obtain new results for nonlinear difference-in-differences with discrete and censored outcomes, and for FELT with random coefficients. Finally, we propose rank- and likelihood-based estimators that achieve vn rate of convergence.

Suggested Citation

  • Irene Botosaru & Chris Muris, 2017. "Binarization for panel models with fixed effects," CeMMAP working papers CWP31/17, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:cemmap:31/17
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Botosaru, Irene & Muris, Chris & Pendakur, Krishna, 2023. "Identification of time-varying transformation models with fixed effects, with an application to unobserved heterogeneity in resource shares," Journal of Econometrics, Elsevier, vol. 232(2), pages 576-597.
    2. Mugnier, Martin & Wang, Ao, 2022. "Identification and (Fast) Estimation of Large Nonlinear Panel Models with Two-Way Fixed Effects," The Warwick Economics Research Paper Series (TWERPS) 1422, University of Warwick, Department of Economics.
    3. Aristodemou, Eleni, 2021. "Semiparametric identification in panel data discrete response models," Journal of Econometrics, Elsevier, vol. 220(2), pages 253-271.
    4. Chrysanthou, Georgios Marios & Vasilakis, Chrysovalantis, 2018. "The Dynamics and Determinants of Bullying Victimisation," IZA Discussion Papers 11902, Institute of Labor Economics (IZA).
    5. Eleni (E.) Aristodemou, 2018. "Semiparametric Identification in Panel Data Discrete Response Models," Tinbergen Institute Discussion Papers 18-065/III, Tinbergen Institute.
    6. Irene Botosaru & Chris Muris & Senay Sokullu, 2022. "Time-Varying Linear Transformation Models with Fixed Effects and Endogeneity for Short Panels," Department of Economics Working Papers 2022-01, McMaster University.
    7. Irene Botosaru & Chris Muris & Krishna Pendakur, 2020. "Intertemporal Collective Household Models: Identification in Short Panels with Unobserved Heterogeneity in Resource Shares," CeMMAP working papers CWP26/20, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    8. Bo E. Honor'e & Martin Weidner, 2020. "Moment Conditions for Dynamic Panel Logit Models with Fixed Effects," Papers 2005.05942, arXiv.org, revised Dec 2023.
    9. Chrysanthou, Georgios Marios & Vasilakis, Chrysovalantis, 2018. "The Dynamics and Determinants of Bullying Victimisation," IZA Discussion Papers 11902, Institute of Labor Economics (IZA).
    10. Bo E. Honoré & Martin Weidner, 2020. "Moment Conditions for Dynamic Panel Logit Models with Fixed Effects," CeMMAP working papers CWP38/20, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    11. Irene Botosaru & Chris Muris, 2022. "Identification of time-varying counterfactual parameters in nonlinear panel models," Papers 2212.09193, arXiv.org, revised Nov 2023.

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    More about this item

    Keywords

    C14; C23; C41.;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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