On the Estimation and Testing of Fixed Effects Panel Data Models with Weak Instruments

Abstract

This chapter studies the asymptotic properties of within-groups k-class estimators in a panel data model with weak instruments. Weak instruments are characterized by the coefficients of the instruments in the reduced form equation shrinking to zero at a rate proportional to nTδ, where n is the dimension of the cross-section and T is the dimension of the time series. Joint limits as (n,T)→∞ show that this within-group k-class estimator is consistent if 0≤δ<12 and inconsistent if 12≤δ<∞.

Citation

Baltagi, B.H., Kao, C. and Liu, L. (2012), "On the Estimation and Testing of Fixed Effects Panel Data Models with Weak Instruments", Terrell, D. and Millimet, D. (Ed.) 30th Anniversary Edition (Advances in Econometrics, Vol. 30), Emerald Group Publishing Limited, Leeds, pp. 199-235. https://doi.org/10.1108/S0731-9053(2012)0000030012