Predicting individual effects in fixed effects panel probit models

Abstract

Many applied settings in empirical economics require estimation of a large number of individual effects, like teacher effects or location effects; in health economics, prominent examples include patient effects, doctor effects or hospital effects. Increasingly, these effects are the object of interest of the estimation, and predicted effects are often used for further descriptive and regression analyses. To avoid imposing distributional assumptions on these effects, they are typically estimated via fixed effects methods. In short panels, the conventional maximum likelihood estimator for fixed effects binary response models provides poor estimates of these individual effects since the finite ..