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RE: st: xtabond and OLS for separate years


From   Kate Ivanova <kivanova@usc.edu>
To   statalist@hsphsun2.harvard.edu
Subject   RE: st: xtabond and OLS for separate years
Date   Mon, 03 May 2004 10:02:13 -0700

Mark,

Thank you very much for your suggestions. They are very helpful. Yes, I did
mean OLS in cross-section so I'll now compare it to the estimators you
specified below. I'll get back again when I have the results. Thanks a lot! 

Kate

-----Original Message-----
From: owner-statalist@hsphsun2.harvard.edu
[mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of Mark Schaffer
Sent: Monday, May 03, 2004 4:09 AM
To: statalist@hsphsun2.harvard.edu
Subject: Re: st: xtabond and OLS for separate years

Kate,

Date sent:      	Sat, 01 May 2004 17:59:00 -0700
From:           	Kate Ivanova <kivanova@usc.edu>
Subject:        	st: xtabond and OLS for separate years
To:             	statalist@hsphsun2.harvard.edu
Send reply to:  	statalist@hsphsun2.harvard.edu

> Hi,
> 
> I am confused by the results I get using xtabond. I have a panel of 116
> countries over 10 years and when I run separate regressions for each year
> using OLS, my variables (income and income squared) are highly significant
> (at a 0.001 level). But when I run xtabond with one lag of the dependent
> variable, they are not significant at all. I wonder why I have such a
> difference between the results. Any help, any ideas would be greatly
> appreciated.

It's hard to tell exactly what's going on from the info you've 
provided, but there are at least two possibilities:

1. You are comparing OLS in cross-section (yes?) and xtabond, which 
you can think of as a first-difference estimator with instrumenting.  
Each of your cross-sections uses the cross-sectional variation across 
116 countries in any year; xtabond using only the time-series 
variation within countries.

A better comparison would be to leave the instrumenting out of it for 
the moment, and compare:

OLS period-by-period (uses only cross-sectional variation)
Between estimator (also uses only cross-sectional variation)
Fixed effects (uses only "within", i.e., time-series, variation)
First differences (also uses only "within" variation)
Random effects (uses both "within" and "between" variation)

2.  xtabond is an IV estimator, and the results you get will depend 
on the instrumenting.  You can compare the xtabond results with the 
results from first-differencing without instrumenting (xtreg, fd), 
for example, and see what happens.

Hope this helps.

--Mark

> 
> Kate
> 
> 


Prof. Mark E. Schaffer
Director
Centre for Economic Reform and Transformation
Department of Economics
School of Management & Languages
Heriot-Watt University, Edinburgh EH14 4AS  UK
44-131-451-3494 direct
44-131-451-3008 fax
44-131-451-3485 CERT administrator
http://www.som.hw.ac.uk/cert
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