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st: Re: dynamic panel with selection and more endogeneous variables


From   "Rodrigo A. Alfaro" <raalfaroa@gmail.com>
To   <statalist@hsphsun2.harvard.edu>
Subject   st: Re: dynamic panel with selection and more endogeneous variables
Date   Tue, 20 Mar 2007 12:08:40 -0400

Nicola,

It is crucial to put y(t-1) or t (something like that) in your RHS. For a large T, you can use -xtreg, fe-, it is known that the bias in the lagged dependent variable decreases with T. Two papers in Econometrica analyze this: Hahn and Kuersteiner (2002) and Alvarez and Arellano (2003). If you are interested in the z's coefficients maybe you can take a look of Hausman-Taylor estimator -help xthtaylor-, again you could modify to allow more instruments in the last step. For several exogenous variables, maybe you are taking care of the possible unobservable in the model then pooled least-square is an option. Anyway, if there is a few number of endogenous variables, I suggest you to simulate the model (as a reduced model) and see which estimator is better.

R.



----- Original Message ----- From: <nicola.baldini2@unibo.it>
To: <statalist@hsphsun2.harvard.edu>
Sent: Tuesday, March 20, 2007 6:48 AM
Subject: st: dynamic panel with selection and more endogeneous variables



I have the following PANEL model:
Regime 1 (observed if z1 = 0): y = y(t-1) + exog
Regime 2 (observed if z1 > 0): y = y(t-1) + exog + z1 + z2 + endog
At t=0, all observations are in regime 1; changing from 1 to 2 depends on y(t-1) and exog; changing from 2 to 1 not possible.
y is a count variable, y(t-1) is past y (I am uncertain about using lagged y or a depreciated stock up to t-1; in regime 2, alternatively, I can use a "years-since regime 2" time counter), z1 and z2 are proportions (endogenous; my key independent variables), endog are additional endogenous variables, exog are exogenous. To put it differently, in regime 1 all endogenous are 0, while in regime 2 z1 is not 0 (and remaining endogenous may be 0 or not).
All endogenous variables are almost time-invariant (e.g. 0/0/0/0/0/0/0/0/50/50/50/50/50/50/50; 0/0/0/0/0/0/0/0/0/0/0/0/0/0/0; 0/0/0/0/0/0/0/0/0/0/0/0/25/25/50; etc...).
I have thought about xtivreg y (z1 z2 endog y(t-1) = exog).
Do you have any suggestion or better idea?

Nicola

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