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Heteroskedasticity-Robust Standard Errors for Fixed Effects Panel Data Regression

2008; Wiley; Volume: 76; Issue: 1 Linguagem: Inglês

10.1111/j.0012-9682.2008.00821.x

1468-0262

James H. Stock, Mark W. Watson,

Economic Growth and Productivity

The conventional heteroskedasticity-robust (HR) variance matrix estimator for cross-sectional regression (with or without a degrees-of-freedom adjustment), applied to the fixed-effects estimator for panel data with serially uncorrelated errors, is inconsistent if the number of time periods T is fixed (and greater than 2) as the number of entities n increases. We provide a bias-adjusted HR estimator that is -consistent under any sequences (n, T) in which n and/or T increase to ∞. This estimator can be extended to handle serial correlation of fixed order.