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st: re: xtabond 2


From   Kit Baum <baum@bc.edu>
To   statalist@hsphsun2.harvard.edu
Subject   st: re: xtabond 2
Date   Fri, 16 Nov 2007 09:43:18 -0500

Bill asked

1. Are 800 observations large enought to run xtabond2?
2. How can I deal with the warnings: relative large instruments than
the observations?


First of all, abdata (the classic dataset used by Arellano-Bond: webuse abdata) has 1031 observations, and it is certainly large enough. What matters more perhaps is the relative size of T and N. The technique is suitable for large N, relatively small T (such as single digits). It will work with larger T, but N should be much larger than T.

To keep from generating 'too many' instruments, use the lags( ) option when specifying gmmstyle() instruments. And read through Roodman's "How to do xtabond2" (you can find it on RePEc, http:// ideas.repec.org).


Kit Baum, Boston College Economics and DIW Berlin
http://ideas.repec.org/e/pba1.html
An Introduction to Modern Econometrics Using Stata:
http://www.stata-press.com/books/imeus.html


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