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st: xtdpd, heterogeneous coefficients, time-variant heterogeneity

Subject   st: xtdpd, heterogeneous coefficients, time-variant heterogeneity
Date   Thu, 19 Feb 2009 15:19:20 +0100

Hello everybody,

I have a balanced panel of 19 countries over 24 time periods. The model is

	g_it= ß_0+δg_(it-1)+ß_1 x_it+ε_it

Now the relationship of g_it,  and x_it is only constant conditional on the country specific time-variant effect μ_it, which is unobserved. μ_it however has no other partial correlation with LHS variable g_it, except through the regressor x_it. Then the coefficients are heterogeneous across the countries. My question is twofold:

Then the system GMM estimator (xtdpd) will deliver an consistent estimation result of ß_1 conditioned on the sample average of μ_it. Is that right?

What can I do to obtain an unconditioned estimate (pure estimate?!) of ß_1, without controlling for the unobserved time-variant effect μ_it?

And perhaps another small question: Is this a case of endogeneity, even though there is no partial relationship between g_it and  μ_it, except through x_it.

Hope you can help me.
Thank you in advance

Markus Baumgarten

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