Abstract
New fixed-effects estimators are proposed for logit and complementary loglog fractional regression models. The standard specifications of these models are transformed into a form of exponential regression with multiplicative individual effects and time-variant heterogeneity, from which four alternative estimators that do not require assumptions on the distribution of the unobservables are proposed. All new estimators are robust to both time-variant and time-invariant heterogeneity and can accomodate fractional responses with observations at the boundary value of zero. Additionally, some of these estimators can be applied to dynamic panel data models and can accommodate endogenous explanatory variables without requiring the specification of a reduced form model. A Monte Carlo study and an application to firm capital structure choices illustrate the usefulness of the suggested estimators.
Acknowledgments
The authors thank the Editor for his valuable suggestions and remarks that substantially improved the paper. Financial support from Fundacao para a Ciencia e a Tecnologia (grants PTDC/EGE-ECO/119148/2010 and UID/ECO/04007/2013) is also gratefully acknowledged. Aspects of this research were presented at the 2nd Annual Conference of the International Association for Applied Econometrics (IAAE) and the 11th Econometric Society World Congress.
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