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If you feel more confortable with AB/GMM, you could be more "safe" working with a TAB and using -xtabond2- to improve your inference for the case of heteroskedastic errors using Windmeijer-robust standard errors. Windmeijer-correction to the standard errors of the second-step should work fine for the case of unbiased estimators. An important warning about WG versus AB/GMM (or TAB) is the fact that for the first you don't need to choose predetermined variables or additional instruments, which for some applications could be important. I am thinking in model where the objective of study is an Euler Equation and the researcher tries to prove a theory. Best regards, Rodrigo. ----- Original Message ----- From: <bmilanovic@worldbank.org> To: <statalist@hsphsun2.harvard.edu> Sent: Saturday, July 28, 2007 8:41 PM Subject: Re: st: using xtabond and xtabond2 > Michael Binder (Dynamic panel data models with homogeneous slopes) shows > that > the bias in the dynamic FE models is equal to > > > (Embedded image moved to file: pic25996.jpg) where ë is the true > coefficient, > and AT and BT complicated expressions that tend respectively to 0 and 1 > when the > time dimension T tends to infinity. Consequently, with a very large T > (say, more > than 50), the bias is quasi non-existent. However, I had T>150 and one of > the > referees strongly complained why I am using FE, and not Arellano-Bond. > > > Branko > > > > > Development Research, World Bank > Email: bmilanovic@worldbank.org or branko_mi@yahoo. > tel: 202-473-6968 > World Bank, Room MC 3-581 > 1818 H Street NW > Washington D.C. 20433 > > For "Worlds Apart" see > http://www.pupress.princeton.edu/titles/7946.html > > Website: > http://econ.worldbank.org/projects/inequality > > For papers see also: > http://econpapers.hhs.se/ > http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=149002 > > > > Michael Hanson > <mshanson@mac.c > om> > To > Sent by: statalist@hsphsun2.harvard.edu > owner-statalist > cc > @hsphsun2.harva > rd.edu > Subject > Re: st: using xtabond and xtabond2 > > 07/28/2007 > 07:55 PM > > > Please respond > to > statalist@hsphs > un2.harvard.edu > > > > > > > On Jul 28, 2007, at 6:56 PM, natalie chan wrote: > >> Maybe this is a question more about econometrics than about Stata but >> I can't find anywhere more appropriate to ask this question. Thanks in >> advance. >> >> I am doing regressions on economic growth equations with a panel data >> of 20 years for 48 countries. I wanted to use dynamic panel approach >> with xtabond or xtabond2, however, the Arellano-Bond methods are >> specified for data with small T and large N. On the other hand, I >> have seen some researchers using Arellano-Bond methods on growth >> models, including Bond himself. Could anyone give me some advice on >> this? Thanks a lot. > > I would like to expand Natalie's question: I have an > application > of > dynamic panel data in which T/N is nearly 3, with N = 50. In David > Roodman's excellent discussion of -xtabond2- [1], he writes, "If T is > large, dynamic panel bias becomes insignificant, and a more > straightforward fixed effects estimator works." (p. 42) However, I > have never been able to find a discussion of how "large" of a T is > "large enough" in the literature (which I interpret is part of > Natalie's question). In the only textbook reference I have found, > Baltagi (2005) [2] writes, "FE, GMM, and LIML exhibit a bias term in > their asymptotic distributions; the biases are of the order 1/T, 1/N, > and 1/(2N-T), respectively." (p. 153) > > Would it be reasonable, therefore, to conclude that in > Natalie's > case (T/N < 1/2), GMM (i.e. AB-type estimators) or LIML would be > preferred, whereas in my case (T/N > 2.5), FE would be preferred? (I > realize that this claim is based on asymptotic arguments, and that > the N & T discussed here are probably too small. Any information > about the small-sample properties of these estimators in a dynamic > panel context would be appreciated as well.) > > I also recognize that this question is at least as much about > statistics (econometrics) as about Stata, and I appreciate any help > or suggestions. > > [1] <http://repec.org/nasug2006/howtodoxtabond2.cgdev.pdf> > [2] <http://www.stata.com/bookstore/eapd.html> > > > -- Mike > > > * > * For searches and help try: > * http://www.stata.com/support/faqs/res/findit.html > * http://www.stata.com/support/statalist/faq > * http://www.ats.ucla.edu/stat/stata/ > > > * * For searches and help try: * http://www.stata.com/support/faqs/res/findit.html * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

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