Bias-corrected Estimation in Dynamic Panel Data Models with Heteroscedasticity

Abstract

This study extends earlier results on bias-corrected estimators for the fixed-effects dynamic panel data model. We derive the inconsistency of the LSDV estimator for finite T and N large in case of both time-series and cross-section heteroscedasticity and show how to implement it in bias correction procedures. Keywords: Bias correction; Dynamic panel data model; Heteroscedasticity; Least squares dummy variable estimator JEL classification codes: C13; C2