Latent group structure in linear panel data models with endogenous regressors

EI-Econometrics Seminar
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Ryo Okuy

Monday 27 Jun 2022, 12:00 - 13:00
Spoken Language
Polak Building
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This paper concerns the estimation of linear panel data models with endogenous regressors and a latent group structure in the coefficients. We consider instrumental variables estimation of the group specific coefficient vector.

We show that direct appli-cations of the Kmeans algorithm to the GMM objective functions do not yield unique estimates. Nonetheless, various alternative approaches are available, and they yield consistent estimators.

We examine the difference in the conditions required for each of the estimation methods. Monte Carlo simulations are conducted to compare these approaches in terms of their classification accuracy.

As an empirical application, we apply our approaches to revisit the relationship between democracy and income.

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