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st: First difference model for dynamic panel data xtabond2 xtivreg


From   Fredrik Wilhelmsson <Fredrik.Wilhelmsson@nek.lu.se>
To   "'statalist@hsphsun2.harvard.edu'" <statalist@hsphsun2.harvard.edu>
Subject   st: First difference model for dynamic panel data xtabond2 xtivreg
Date   Fri, 8 Oct 2004 11:02:39 +0200

I have some problems with estimating a dynamic panel data in first
differences of the following type:
DY(it)=DY(it-1)+DX(it-1)+sector and time dummy variables

I would like to instrument DY(it-1) and DX(it-1) with Y(it-2), respectively
X(it-2) inline with Hsiao Anderson (1981) suggestions. xtivreg...,fd seems
to estimate the model but use the lagged first differences as instruments.
Is it possible to estimate this kind of model maybe using any other
commands, for example, xtabond xtabond2? And how could it be specified? 

I have tried the following: xi: xtabond2 y l.(y x) i.year sec1-sec120,
gmm(l.(x y),lag(1 1)) iv(i.year sec1-sec120 passthru) noleveleq robust but
it do not do the trick.

I have estimated my model with system GMM and difference GMM (xtabond2) but
I keep rejecting that the instruments are valid. Besides, the number of
observations of each individual is rather low (maximum of 7 observations)
and the panel is unbalanced.

Any suggestions would be most appreciated

Fredrik Wilhelmsson
Ph.D. Student
University of Lund 
Department of Economics
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