I have panel data and would like to adjust for potential autocorrelation in the dependent variable as well as the endogeneity in one of the independent variables. Would 2SLS with cluster adjustment (i.e. ivreg with cluster option) be sufficient? I was suggested to use the Arellano-Bond (1991)/Arellano-Bover (1995) estimation procedure. I assume it is GMM. Would that be necessary? How do these two methodologies differ? Thanks.
Yuluen
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