Modified-likelihood estimation of fixed-effect models for dyadic data

Abstract

We consider point estimation and inference based on modifications of the profile likelihood in models for dyadic interactions between n agents featuring agent-specific parameters. The maximum-likelihood estimator of such models has bias and standard deviation of order n-1 and so is asymptotically biased. Estimation based on modified likelihoods leads to estimators that are asymptotically unbiased and likelihood ratio tests that exhibit correct size.

Keywords

JEL codes

Replaced by

Koen Jochmans, “Modified-likelihood estimation of fixed-effect model for dyadic data”, Journal of the Spanish Economic Association, vol. 14, 2023, pp. 417–433.

Reference

Koen Jochmans, “Modified-likelihood estimation of fixed-effect models for dyadic data”, TSE Working Paper, n. 24-1502, May 2023.