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Abstract

This study describes a new Stata routine that computes bias-corrected LSDV estimators and thier bootstrap variance-covariance matrix for dynamic (possibly) unbalanced panel data models. A Monte Carlo analysis is carried out to evaluate the finite-sample performance of the bias corrected LSDV estimators in comparison to the original LSDV estimators and three popular N-consistent estimators: Arellano-Bond, Anderson-Hsiao and Blundell-Bond. Results strongly support the bias-corrected LSDV estimators according to bias and root mean squared error criteria when the number of individuals is small.

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File URL: ftp://ftp.unibocconi.it/pub/RePEc/cri/papers/WP165Bruno.pdf
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Bibliographic Info

Paper provided by KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy in its series KITeS Working Papers with number 165.

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Length: 28 pages
Date of creation: Jun 2005
Date of revision: Jun 2005
Handle: RePEc:cri:cespri:wp165

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Related research

Keywords: Bias approximation; Unbalanced panels; Dynamic Panel data; LSDV estimator; Monte Carlo experiment; Bootstrap variance-covariance;

Other versions of this item:

Find related papers by JEL classification:

• C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
• C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General

This paper has been announced in the following NEP Reports:

• NEP-ALL-2005-06-27 (All new papers)
• NEP-ECM-2005-06-27 (Econometrics)
• NEP-ETS-2005-06-27 (Econometric Time Series)

References

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1. 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.
   
   • Tom Doan, . "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
2. Maurice J.G. Bun & Jan F. Kiviet, 2002. "On the Diminishing Returns of Higher-order Terms in Asymptotic Expansions of Bias," Tinbergen Institute Discussion Papers 02-099/4, Tinbergen Institute, revised 24 Oct 2002.
3. Bruno, Giovanni S.F., 2005. "Approximating the bias of the LSDV estimator for dynamic unbalanced panel data models," Economics Letters, Elsevier, vol. 87(3), pages 361-366, June.
   
   • Giovanni S.F. Bruno, 2004. "Approximating the Bias of the LSDV Estimator for Dynamic Unbalanced Panel Data Models," KITeS Working Papers 159, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Jul 2004.
4. Judson, Ruth A. & Owen, Ann L., 1999. "Estimating dynamic panel data models: a guide for macroeconomists," Economics Letters, Elsevier, vol. 65(1), pages 9-15, October.
5. Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
   
   • Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
   • Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
   • R Blundell & Steven Bond, . "Initial conditions and moment restrictions in dynamic panel data model," Economics Papers W14&104., Economics Group, Nuffield College, University of Oxford.
6. Maurice J.G. Bun & Jan F. Kiviet, 2001. "The Accuracy of Inference in Small Samples of Dynamic Panel Data Models," Tinbergen Institute Discussion Papers 01-006/4, Tinbergen Institute.
7. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
8. Kajal Lahiri, 2005. "Analysis of Panel Data," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(4), pages 1093-1095.
9. Kiviet, Jan F., 1995. "On bias, inconsistency, and efficiency of various estimators in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 68(1), pages 53-78, July.
   
   • Tom Doan, . "LSDVC: RATS procedure to estimate a dynamic FE model with correction for bias," Statistical Software Components RTS00111, Boston College Department of Economics.
10. Bun, Maurice J. G. & Kiviet, Jan F., 2003. "On the diminishing returns of higher-order terms in asymptotic expansions of bias," Economics Letters, Elsevier, vol. 79(2), pages 145-152, May.
11. David Roodman, 2003. "XTABOND2: Stata module to extend xtabond dynamic panel data estimator," Statistical Software Components S435901, Boston College Department of Economics, revised 18 Feb 2013.
12. Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 47-82, January.

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