System GMM estimation of panel data models with time varying slope coefficients
We highlight the fact that the Sargan-Hansen test for GMM estimators applied to panel data is a joint test of valid orthogonality conditions and coefficient stability over time. A possible reason why the null hypothesis of valid orthogonality conditions is rejected is therefore that the slope coefficients vary over time. One solution is to estimate an empirical model where the coefficients are time specifi…c. We apply this solution to the system GMM estimatior of the Cobb-Douglas production functions for a selection of Swedish industries, and …find that relaxing the assumption that slope coefficients are constant over time results in considerably more satisfactory outcomes of the Sargan-Hansen test.
|Date of creation:||10 Dec 2013|
|Contact details of provider:|| Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden|
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
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