Direct semi-parametric estimation of fixed effects panel data varying coefficient models

作者：Rodriguez Poo Juan M^*; Soberon Alexandra

来源：Econometrics Journal, 2014, 17(1): 107-138.

DOI：10.1111/ectj.12022

• Fixed effects
• Local linear regression
• Oracle efficient estimator
• Panel data
• Varying coefficient model

In this paper, we present a new technique to estimate varying coefficient models of unknown form in a panel data framework where individual effects are arbitrarily correlated with the explanatory variables in an unknown way. The estimator is based on first differences and then a local linear regression is applied to estimate the unknown coefficients. To avoid a non-negligible asymptotic bias, we need to introduce a higher-dimensional kernel weight. This enables us to remove the bias at the price of enlarging the variance term and, hence, achieving a slower rate of convergence. To overcome this problem, we propose a one-step backfitting algorithm that enables the resulting estimator to achieve optimal rates of convergence for this type of problem. It also exhibits the so-called oracle efficiency property. We also obtain the asymptotic distribution. Because the estimation procedure depends on the choice of a bandwidth matrix, we also provide a method to compute this matrix empirically. The Monte Carlo results indicate the good performance of the estimator in finite samples.

• 出版日期2014-2