Efficiency of QMLE for dynamic panel data models with interactive effects

2023/12/13 by Jushan Bai, Bai, Jushan
Economics, Econometrics and Finance · #Econometrics (econ.EM) #FOS: Economics and business #Fiscal Policy and Economic Growth #Regional Economics and Spatial Analysis #Spatial and Panel Data Analysis

paper · pdf · doi:10.48550/arxiv.2312.07881

openalex publication_date 2023/12/13 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28

Abstract

This paper studies the problem of efficient estimation of panel data models in the presence of an increasing number of incidental parameters. We formulate the dynamic panel as a simultaneous equations system, and derive the efficiency bound under the normality assumption. We then show that the Gaussian quasi-maximum likelihood estimator (QMLE) applied to the system achieves the normality efficiency bound without the normality assumption. Comparison of QMLE with the fixed effects approach is made.

Related

• Quasi Maximum-Likelihood Estimation of Dynamic Panel Data Models
• Adjusted QMLE for the spatial autoregressive parameter
• Uniform Quasi ML based inference for the panel AR(1) model
• Composite Quasi-Likelihood Estimation of Dynamic Panels with Group-Specific Heterogeneity and Spatially Dependent Errors
• Fixed T Estimation of Linear Panel Data Models with Interactive Fixed Effects