Abstract
In this paper we follow Hansen (2015a) and propose a Stein-like estimator for linear panel data models. Our estimator takes a weighted average of the fixed effects estimator and the random effects estimator using the weights constructed from Hausman’s (1978) testing statistic. We establish the asymptotic distribution of the Stein-like estimator and show its asymptotic risk being strictly smaller than the fixed effects estimator within a local asymptotic framework.
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