On the Fixed-Effects Vector Decomposition

  title={On the Fixed-Effects Vector Decomposition},
  author={Trevor Breusch and Michael B. Ward and Hoa T Nguyen and Tom Kompas},
This paper analyzes the properties of the fixed-effects vector decomposition estimator, an emerging and popular technique for estimating time-invariant variables in panel data models with group effects. This estimator was initially motivated on heuristic grounds, and advocated on the strength of favorable Monte Carlo results, but with no formal analysis. We show that the three-stage procedure of this decomposition is equivalent to a standard instrumental variables approach, for a specific set… CONTINUE READING
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