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st: Re: system estimation with dynamic panel

From   Kit Baum <[email protected]>
To   [email protected]
Subject   st: Re: system estimation with dynamic panel
Date   Tue, 5 Aug 2008 07:14:12 -0400

< >

In an earlier message I wrote

Estimation of each of these equations with Arellano-Bond would be perfectly appropriate. There are no cross-equation constraints. It is a common misconception that if you can write down a system of equations (in this case a recursive system) you need a systems estimator. Systems estimators potentially gain efficiency; they are not needed for consistency. "Limited information" estimation, that is, estimating each equation separately with Arellano-Bond is just fine here. In the absence of cross-equation constraints, you never 'need' to use a systems estimator.

My advice still holds re the example below. Arellano-Bond and similar dynamic panel estimators are often applied to models in which one or more of the RHS variables are considered jointly determined with the LHS variable. Estimation of each equation by A-B or Blundell-Bond should yield consistent estimates if tests show that the specification is adequate and the lagged instruments are suitably uncorrelated with the error.

And no, at this point I do not know other Stata solutions for a systems estimator of dynamic panels. Perhaps if you could cite a specific estimator that you are interested in, it would be easier to ascertain whether it could readily be implemented using existing Stata commands.

Kit Baum, Boston College Economics and DIW Berlin
An Introduction to Modern Econometrics Using Stata:

On Aug 5, 2008, at 02:33 , Hewan Belay wrote:

If I may pick up a question below by Ozlem in May, that was only very partially answered by Kit/Nicola: Nicola's/Kit's response was an econometric one rather than a stata one. To follow up on this response:
What if the system, however, looks like this instead:
y(it)=b0*y(it-1) + b1*X(it) + b2*Z(it)
Z(it)=a0*Z(it-1) + a1*W(it) + a2*y(it)
In other words, what if the model *does* call for a systems approach: Is there a way in stata?

I have grappled with this once a couple years ago, and there was no response on the list which led me to believe that stata doesn't have a set of commands for systems estimations of panel data equations -- however, I got lots and lots of follow ups by other listers over the years to my private mail who had seen my question on the list, asking if I ever discovered an approach since then.
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