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st: Autocorrelation in Panel Data - XTGLS first differenced or corr(ar1)?

From   "Levchak, Philip J" <>
To   "" <>
Subject   st: Autocorrelation in Panel Data - XTGLS first differenced or corr(ar1)?
Date   Wed, 19 Dec 2012 05:02:44 +0000


I am analyzing a dataset of 66 nations over 20 years (unbalanced) - using xtgls.  My biggest concern with the data is the presence of autocorrelation.  I test for autocorrelation using Woolridge's test for serial correlation.  The regression is in first differences and is weighted by population size.  It indicates no panel autocorrelation.  Do I need to keep the regression in differenced form for xtgls?  I have tried using xtgls, specifying corr(psar1) in non-differenced form.  However, the results from the differenced regression and the non-differenced (psar1) regression are quite different.  Is there a reason that I should use one method over the other?  

I also tried the user-written test for autocorrelation (xtactest) following xtgls (link below).  Regardless of what method I use (differenced or psar1), the test indicates serial correlation in the residuals.

Phil Levchak
Ph.D. Candidate
Department of Sociology
University of Iowa
Iowa City, IA 52245
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