A robust Hausman-Taylor estimator

Badi H. Baltagi, Georges Bresson

Research output: Chapter in Book/Report/Conference proceedingConference contribution

7 Scopus citations

Abstract

This chapter suggests a robust Hausman and Taylor (1981), hereafter HT, estimator that deals with the possible presence of outliers. This entails two modifications of the classical HT estimator. The first modification uses the Bramati and Croux (2007) robust Within MS estimator instead of the Within estimator in the first stage of the HT estimator. The second modification uses the robust Wagenvoort and Waldmann (2002) two-stage generalized MS estimator instead of the 2SLS estimator in the second step of the HT estimator. Monte Carlo simulations show that, in the presence of vertical outliers or bad leverage points, the robust HT estimator yields large gains in MSE as compared to its classical Hausman-Taylor counterpart. We illustrate this robust version of the HT estimator using an empirical application.

Original languageEnglish (US)
Title of host publicationEssays in Honor of Jerry Hausman
EditorsBadi Baltagi, Carter Hill, Whitney Newey, Halbert White
Pages175-214
Number of pages40
DOIs
StatePublished - 2012

Publication series

NameAdvances in Econometrics
Volume29
ISSN (Print)0731-9053

Keywords

  • Bad leverage points
  • Hausman-Taylor
  • Panel data
  • Two-stage generalized MS estimator
  • Vertical outliers

ASJC Scopus subject areas

  • Economics and Econometrics

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