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st: reg3 or xt for simultaneous equation model with panel data and lagged effects?


From   Rajiv Sabherwal <sabherwal@umsl.edu>
To   statalist@hsphsun2.harvard.edu
Subject   st: reg3 or xt for simultaneous equation model with panel data and lagged effects?
Date   Fri, 23 Feb 2007 13:25:22 -0600

Hello,

A PhD student and I are trying to test a model containing simultaneous equations such as the following:

y1(t) = a1 + b11*y1(t-1) + b12*y2(t-1) +b13*y3(t-1) + b14*y4(t-1) + b15*y5(t-1) + b16*x1 + b17*x2
y2(t) = a2 + b21*y2(t-1) + b23*y3(t-1) + b24*y4(t-1) + b25*y5(t-1) + b26*x1 + b27*x2
y3(t) = a3 + b31*x3 + b32*x4 +b33*x5
y4(t) = a4 + b41*x6 + b42*x7
y5(t) = a5 + b51*x8 + b52*x9

We have panel data, with 5000 units observed at 50 periods each, and some time-invariant exogeneous variables characterizing each unit. None of the exogeneous variables vary over time, but all the endogeneous variables do.

We believe random effects would be appropriate as we also need to study the effects of the time-invariant exogeneous variables. We are contemplating using reg3 (I couldn't find an appropriate xt command, as xtivreg and xtivreg2 seem to be for a single endogeneous variable). Would reg3 be appropriate for this situation? Also, how would we identify the panel variable in reg3?

I have searched the internet and Stata discussion lists, but could not find an answer. I did find the following paper, which uses reg3, but with fixed effects and no time-invariant exogeneous variables.

Why Firms Want to Organize Efficiently and What Keeps Them from Doing so: Inappropriate Governance, Performance, and Adaptation in a Deregulated Industry, Jack A. Nickerson; Brian S. Silverman, Administrative Science Quarterly, Vol. 48, No. 3. (Sep., 2003), pp. 433-465.

Please advise. Thanks a lot, and best wishes,

Rajiv

----
Rajiv Sabherwal, Ph.D.
University of Missouri Curators Professor
CCB 206, College of Business Administration
University of Missouri, St. Louis
8001 Natural Bridge Road
St. Louis, MO 63121




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