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Estimation and inference in dynamic unbalanced panel-data models with a small number of individuals

  • Giovanni S. F. Bruno

    (Istituto di Economia Politica, Bocconi University, Milan)

This article describes a new Stata routine, xtlsdvc, that computes bias-corrected least-squares dummy variable (LSDV) estimators and their boot- strap variance-covariance matrix for dynamic (possibly) unbalanced panel-data models with strictly exogenous regressors. 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 estimator and three popular N-consistent estimators: Arellano-Bond, Anderson-Hsiao and Blundell-Bond. Results strongly sup- port the bias-corrected LSDV estimators according to bias and root mean squared error criteria when the number of individuals is small. Copyright 2005 by StataCorp LP.

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Article provided by StataCorp LP in its journal Stata Journal.

Volume (Year): 5 (2005)
Issue (Month): 4 (December)
Pages: 473-500

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Handle: RePEc:tsj:stataj:v:5:y:2005:i:4:p:473-500
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  1. 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.
  2. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
  3. 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.
  4. Steve Bond, 2002. "Dynamic panel data models: a guide to microdata methods and practice," CeMMAP working papers CWP09/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  5. 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.
  6. Kajal Lahiri, 2005. "Analysis of Panel Data," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(4), pages 1093-1095.
  7. 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.
  8. 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.
  9. David Roodman, 2003. "XTABOND2: Stata module to extend xtabond dynamic panel data estimator," Statistical Software Components S435901, Boston College Department of Economics, revised 07 May 2015.
  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. 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.
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