Robust Estimation of Linear Fixed Effects Panel Data Models with an Application to the Exporter Productivity Premium

18 Pages Posted: 10 May 2010

See all articles by Vincenzo Verardi

Vincenzo Verardi

FUNDP - University of Namur. CRED

Joachim Wagner

University of Lueneburg - Institute of Economics; Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Economics; IZA Institute of Labor Economics

Abstract

In empirical studies it often happens that some variables for some units are far away from the other observations in the sample. These extreme observations, or outliers, often have a large impact on the results of statistical analyses – conclusions based on a sample with and without these units may differ drastically. While applied researchers tend to be aware of this, the detection of outliers and their appropriate treatment is often dealt with in a rather sloppy manner. One reason for this habit seems to be the lack of availability of appropriate canned programs for robust methods that can be used in the presence of outliers. Our paper intents to improve on this situation by presenting a highly robust method for estimation of the popular linear fixed effects panel data model, and to supply Stata code for it. In an application from the field of the micro-econometrics of international firm activities we demonstrate that outliers can indeed drive results.

Keywords: Stata, outliers, panel data, robust estimation, exporter productivity premium

JEL Classification: C23, C81, C87, F14

Suggested Citation

Verardi, Vincenzo and Wagner, Joachim, Robust Estimation of Linear Fixed Effects Panel Data Models with an Application to the Exporter Productivity Premium. IZA Discussion Paper No. 4928, Available at SSRN: https://ssrn.com/abstract=1603377

Vincenzo Verardi (Contact Author)

FUNDP - University of Namur. CRED ( email )

8 Rempart de la Vierge
Namur, 5000
Belgium

Joachim Wagner

University of Lueneburg - Institute of Economics ( email )

PO Box 2440
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Germany
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IZA Institute of Labor Economics

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