Maria Elena Bontempi, Jan Ditzen
arXiv 1 Dec 2023 · Econometrics
arXiv:2312.00399 · PDF · DOI · OpenAlex · Extracted main text
We introduce a new estimator, CRE-GMM, which exploits the correlated random effects (CRE) approach within the generalised method of moments (GMM), specifically applied to level equations, GMM-lev. It has the advantage of estimating the effect of measurable time-invariant covariates using all available information. This is not possible with GMM-dif, applied to the equations of each period transformed into first differences, while GMM-sys uses little information as it adds the equation in levels for only one period. The GMM-lev, by implying a two-component error term containing individual heterogeneity and shock, exposes the explanatory variables to possible double endogeneity. For example, the estimation of actual persistence could suffer from bias if instruments were correlated with the unit-specific error component. The CRE-GMM deals with double endogeneity, captures initial conditions and enhance inference. Monte Carlo simulations for different panel types and under different double endogeneity assumptions show the advantage of our approach. The empirical applications on production and R&D contribute to clarify the advantages of using CRE-GMM.
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The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | Alvarez, J., Arellano, M (2022) Robust likelihood estimation of dynamic panel data models | 0.928 | 4 | 3 | 100% |
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| 8 | Kripfganz, S (2019) Generalized Method of Moments Estimation of Linear Dynamic Panel Data Models | 0.794 | 18 | 3 | 50% |
| 9 | Alvarez, J., Arellano, M (2003) The time series and cross-section asymptotics of dynamic panel data estimators | 0.737 | 3 | 2 | 100% |
| 10 | Blundell, R. W., Bond, S. R (1998) Initial conditions and moment restrictions in dynamic panel data models | 0.737 | 3 | 2 | 100% |
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