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Handling the measurement error problem by means of panel data: Moment methods applied on firm data

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  • Erik Biørn

    ()
    (University of Oslo, Department of Economics)

Abstract

The estimation of a linear equation from panel data with measurement errors is considered. The equation is estimated (I) by methods operating on the equation in differenced period means, and (II) by Generalized Method of Moments (GMM) procedures using (a) the equation in differences with instruments in levels and (b) the equation in levels with instruments in differences. Both difference transformations eliminate unobserved individual heterogeneity. Examples illustrating the input response to output changes for materials and capital inputs from an eight year panel of Norwegian manufacturing firms, are given.

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Bibliographic Info

Paper provided by International Conferences on Panel Data in its series 10th International Conference on Panel Data, Berlin, July 5-6, 2002 with number B6-1.

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Date of creation: Mar 2002
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Handle: RePEc:cpd:pd2002:b6-1

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Keywords: Panel Data. Errors-in-Variables. GMM Estimation. Factor Demand. Returns to scale;

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  1. Biorn, Erik & Klette, Tor Jakob, 1999. " The Labour Input Response to Permanent Changes in Output: An Errors-in-Variables Analysis Based on Panel Data," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(3), pages 379-404, September.
  2. Zvi Griliches & Jerry A. Hausman, 1984. "Errors in Variables in Panel Data," NBER Technical Working Papers 0037, National Bureau of Economic Research, Inc.
  3. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
  4. Nelson, C. & Startz, R., 1988. "Some Furthere Results On The Exact Small Sample Properties Of The Instrumental Variable Estimator," Working Papers 88-06, University of Washington, Department of Economics.
  5. Boozer, Michael A., 1997. "Econometric Analysis of Panel Data Badi H. Baltagi Wiley, 1995," Econometric Theory, Cambridge University Press, vol. 13(05), pages 747-754, October.
  6. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  7. Biorn, Erik & Klette, Tor Jakob, 1998. "Panel data with errors-in-variables: essential and redundant orthogonality conditions in GMM-estimation," Economics Letters, Elsevier, vol. 59(3), pages 275-282, June.
  8. White, Halbert, 1982. "Instrumental Variables Regression with Independent Observations," Econometrica, Econometric Society, vol. 50(2), pages 483-99, March.
  9. Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
  10. Bekker, P. & Kapteyn, A.J. & Wansbeek, T., 1985. "Consistent sets of estimates for regressions with correlated or uncorrelated measurement errors in arbitrary subsets of all variables," Research Memorandum 186, Tilburg University, Faculty of Economics and Business Administration.
  11. Biorn, Erik, 1992. "The Bias of Some Estimators for Panel Data Models with Measurement Errors," Empirical Economics, Springer, vol. 17(1), pages 51-66.
  12. Klepper, Steven & Leamer, Edward E, 1984. "Consistent Sets of Estimates for Regressions with Errors in All Variables," Econometrica, Econometric Society, vol. 52(1), pages 163-83, January.
  13. Wansbeek, Tom, 2001. "GMM estimation in panel data models with measurement error," Journal of Econometrics, Elsevier, vol. 104(2), pages 259-268, September.
  14. K. Newey, Whitney, 1985. "Generalized method of moments specification testing," Journal of Econometrics, Elsevier, vol. 29(3), pages 229-256, September.
  15. Erik Bi�rn, 2000. "Panel Data With Measurement Errors: Instrumental Variables And Gmm Procedures Combining Levels And Differences," Econometric Reviews, Taylor & Francis Journals, vol. 19(4), pages 391-424.
  16. Ahn, Seung C. & Schmidt, Peter, 1995. "Efficient estimation of models for dynamic panel data," Journal of Econometrics, Elsevier, vol. 68(1), pages 5-27, July.
  17. Jorgenson, Dale W., 1986. "Econometric methods for modeling producer behavior," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 3, chapter 31, pages 1841-1915 Elsevier.
  18. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
  19. Douglas Staiger & James H. Stock, 1994. "Instrumental Variables Regression with Weak Instruments," NBER Technical Working Papers 0151, National Bureau of Economic Research, Inc.
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