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A simple method to estimate large fixed effects models applied to wage determinants and matching

Publikace

Tento text není v aktuálním jazyce dostupný. Zobrazuje se verze "en".Abstrakt

Models with high dimensional sets of fixed effects are frequently used to examine, among others, linked employer-employee data, student outcomes and migration. Estimating these models is computationally difficult, so simplifying assumptions that cause bias are often invoked to make computation feasible and specification tests are rarely conducted.

I present a simple method to estimate large two-way fixed effects (TWFE) and worker-firm match effect models without additional assumptions. It computes the exact OLS solution including estimates of the fixed effects and makes testing feasible even with multi-way clustered errors.