Lagged dependent variables (LDVs) are commonly used in regression analysis, yet some research argues against them due to potential bias.

➡️ The Problem: Previous studies suggested LDVs negatively bias coefficient estimates if they're part of the data-generating process.

➡️ New Approach: This paper demonstrates that properly accounting for autocorrelation—by including more lagged dependent variables or other lags—actually improves accuracy.

➡️ Simulation Results: Using Monte Carlo simulations, we show this method yields significantly better estimates than alternatives.

➡️ Recommendation: LDVs should be included confidently in robust estimation strategies to avoid bias.