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RE: st: Does the xtabond command have a mistake???


From   "David M. Drukker, StataCorp" <ddrukker@stata.com>
To   statalist@hsphsun2.harvard.edu
Subject   RE: st: Does the xtabond command have a mistake???
Date   Thu, 06 May 2004 17:53:55 -0500

Tewodaj Mogues <tmogues@students.wisc.edu> asked about a problem with
-xtabond- that occurs with lags of predermined variables.  We have
researched the issue and concluded that he is correct.  -xtabond- is using
levels lagged one or more periods as instruments for predetermined
variables, regardless of the number of lags of the predermined variables
included in the model.  -xtabond- should only be using levels lagged p+1 or
more times, where p is the number of lags of the predetermined variables in
the model.

This problem implies that the current -xtabond- produces inconsistent
estimates of the parameters in models with lags of the predetermined
variables.  For instance, estimates from the model

. xtabond y , pre(x , lag(1, .)) 

are not consistent.  

This problem does not arise when there are no lags of the predetermined
variables.  For instance, the current -xtabond- produces consistent
estimates from the model

. xtabond y , pre(x)

-xtabond- also produces consistent estimates for the models

. xtabond y , lags(2)
. xtabond y l(0/1).x1 , pre(x2)
. xtabond y l(0/1).x1 , pre(x2, lag(0, 1))

The problem will be fixed in an upcoming ado update that we expect to have
in distribution early next week.

     --David
       drukker@stata.com
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