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st: The use of (time) dummies in a dynamic system GMM framework, usingxtabond2

From   Joost Vandewege <[email protected]>
To   [email protected]
Subject   st: The use of (time) dummies in a dynamic system GMM framework, usingxtabond2
Date   Tue, 17 Feb 2004 14:52:33 +0100

Dear stata-user,

Can you tell me what is the right way to include time dummies, or dummies in general when using the xtabond2 command? The difference equation cannot deal with normal dummies, while the level equation does need normal (0-1) dummies. I have tried to replicate DPD98-output (where there is an option to 'use time dummies') with identical datasets by including the dummies as they are (0 or 1)for the level equation, and by including a transformed dummy series (that becomes the normal dummy series after taking first differences) for the difference equation.
However, this does not lead to the required results, and replication of DPD-co�fficients seems impossible. I know that standard errors are not comparable between stata and DPD, because Stata uses Windmeijer correction, but the replication of the coefficients themselves ought to be possible. However, I can't seem to succeed.

Thus; in one sentence: how does one correctly enter dummy variables with the xtabond2 command? What should those dummies look like?

Kind Regards,


Joost vandewege
Department of Social Economics
Faculty of Economics and Business Administration
Hoveniersberg 24
9000 Gent
phone: +32 (0)92647877
[email protected]

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