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From |
"Mani, Vidya (Kenan-Flagler)" <Vidya_Mani@unc.edu> |

To |
"'statalist@hsphsun2.harvard.edu'" <statalist@hsphsun2.harvard.edu> |

Subject |
st: structural estimation of exponential model with foc using gmm |

Date |
Tue, 9 Mar 2010 05:44:11 -0500 |

Dear All, I had a question on structural estimation using GMM. I have 2 equations: 1. Sales equation: S = a*(N^b1)*exp(-b2/l) 2. Profit equation: P = S - w*l The parameters to be estimated are: a, b1, b2 and w The FOC wrt l for the profit equation (equation 2, by substituting the value of S) is 3. a*(N^b1)*exp(-b2/l)*(b2/l^2) - w = 0 Using GMM I would like to estimate equations 1 and 3 with instruments as N and l. However, if I use equation 3 in its present form, I do not seem to get convergence even after trying different initial values, providing derivatives for parameters and using a log form. I would like to know if I can substitute equation 3 with 4. S*b2 - w*(l^2) = 0 Where I use the form of S from equation 1 and substitute back in 3. I now estimate equations 1 and 4 as the moment equations in GMM. Would it be possible to tell me if I am making a mistake while estimating the parameters a, b1, b2 and w using equations 1 and 4 instead of using equations 1 and 3? Thank you for your help, Vidya * * For searches and help try: * http://www.stata.com/help.cgi?search * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

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