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Reprint of: Initial conditions and moment restrictions in dynamic panel data models

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  • Blundell, Richard
  • Bond, Stephen

Abstract

Estimation of the dynamic error components model is considered using two alternative linear estimators that are designed to improve the properties of the standard first-differenced GMM estimator. Both estimators require restrictions on the initial conditions process. Asymptotic efficiency comparisons and Monte Carlo simulations for the simple AR(1) model demonstrate the dramatic improvement in performance of the proposed estimators compared to the usual first-differenced GMM estimator, and compared to non-linear GMM. The importance of these results is illustrated in an application to the estimation of a labour demand model using company panel data.

Suggested Citation

  • Blundell, Richard & Bond, Stephen, 2023. "Reprint of: Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 234(S), pages 38-55.
    • Handle: RePEc:eee:econom:v:234:y:2023:i:s:p:38-55
    DOI: 10.1016/j.jeconom.2023.03.001
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    References listed on IDEAS

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    More about this item

    Keywords

    Dynamic panel data; Error components; Weak instruments; Initial conditions; GMM;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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