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st: Help with 'xtabond' command


From   Anupam Nanda <ANUPAM.NANDA@huskymail.uconn.edu>
To   statalist@hsphsun2.harvard.edu
Subject   st: Help with 'xtabond' command
Date   Fri, 05 Aug 2005 14:08:29 -0400

Hi Everybody,

I am estimating a dynamic panel with stata command 'xtabond'. I have a question regarding the command specification. Following is given by
-help xtabond command.


xtabond estimates a dynamic panel data model via the Arellano-Bond estimator.  Consider the model
y_it =  y_(it-1)a_1 + ... + y_(it-p)a_p + x_(it)b_1 + w_(it)b_2 + v_i + e_(it)      i={1,...,N};     t={1,...,T_i},

where

the a_1,...,a_p are p parameters to be estimated
x_(it) is a (1 X k_1) vector of strictly exogenous covariates
b_1 is a (1 X k_1) vector of parameters to be estimated
w_(it) is a (1 X k_2) vector of predetermined covariates
b_2 is a (1 X k_2) vector of parameters to be estimated
v_i are the random effects that are independent and identically distributed (iid) over the individuals with variance s_v*s_v
and e_(it) are iid over the whole sample with variance s_e*s_e.


Now, I am specifying the command as:

xi: xtabond y l(0/1).x1 l(0/1).x2 i.time, diffvars(iz1 iz2 iz3) lags(1) robust small artests(1);

In above specification, y is the depvar, x1 and x2 are covariates with their lags. And, z's in diffvars() are strictly exogenous
variables which are already first-differenced (i.e. iz's). My questions are: does xtabond perform the first differencing for all the variables
specified in the command line? Do I need to first-difference the vars in diffvars() first and then specify them in the command line? Do I also need to first difference the y and x's and then specify them in the command line? or I do not need to do any first-differencing before specifying them in the command line - 'xtabond' would do that and estimate?



I would greatly appreciate if someone on the list could answer these questions for me.

Thanks,

Anupam


Anupam Nanda
Ph.D. Candidate in Economics
Univ. of Connecticut,
341, Mansfield Rd., U-63,
Storrs, CT 06269
Anupam.Nanda@huskymail.uconn.edu

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