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st: AR(1) in panel data


From   Mauro Mastrogiacomo <M.Mastrogiacomo@cpb.nl>
To   "'statalist@hsphsun2.harvard.edu'" <statalist@hsphsun2.harvard.edu>
Subject   st: AR(1) in panel data
Date   Wed, 17 Aug 2011 16:03:33 +0200

Hi,
A referee is asking me to check the degree of persistence of income shocks in my panel data across two groups. I have thought of looking at the difference between income and its mean (call it y) and estimate two AR(1) models like:
y_{t}=alpha*y_{t-1}+epsilon
and the compare the results for both groups.

How to estimate this?
Pooled OLS (that is to say "reg ..., cluster") doesn't look appropriate as I need to assume that y and its' lag are exogenous to one another! 
The only alternative I could come up with was xtabond. The problem is it seems to me overkill, for such a simple check, to have to use such an expensive model (which would cost met a couple of instruments).

Any suggestion on a quick and easy way to estimate an AR(1) in panel data?
Thanks
Mauro
 

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