English

Inference in Unbalanced Panel Data Models with Interactive Fixed Effects

Econometrics 2026-05-19 v4

Abstract

We derive the asymptotic theory of Bai (2009)'s interactive fixed effects estimator for unbalanced panels in which the source of attrition is conditionally random. For inference, we propose a method of alternating projections algorithm based on straightforward scalar expressions to compute the residualized variables required for bias correction and covariance matrix estimation. Simulation experiments confirm that our asymptotic results provide reliable finite-sample approximations. We also reassess Acemoglu et al. (2019). Allowing for a more general form of unobserved heterogeneity, we confirm significant effects of democratization on economic growth.

Keywords

Cite

@article{arxiv.2004.03414,
  title  = {Inference in Unbalanced Panel Data Models with Interactive Fixed Effects},
  author = {Daniel Czarnowske and Amrei Stammann},
  journal= {arXiv preprint arXiv:2004.03414},
  year   = {2026}
}

Comments

57 pages, 6 figures, 14 tables