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st: GLS estimator for xtivreg?

From   "Bromiley, Philip" <>
To   "" <>
Subject   st: GLS estimator for xtivreg?
Date   Thu, 8 Dec 2011 13:01:12 -0800

I have multiple observations per firm and a large number of firms.  Firms vary massively in scale. The model includes one endogenous variable.  I'd like to do xtivreg with a gls correction for the scale differences across firms.  As I understand it, the robust estimator fixes some problems with the standard errors, but leaves the large firms dominating the estimates of the betas.

It seems like I could either (i) do a pre-estimate using xtreg, xtivreg, or xtivreg2 to predict residuals which I then use to estimate firm standard deviations followed by a xtivreg2 with weights, or (ii) do a separate estimate of the instrument for the endogenous variable followed by xtgls using the instrument allowing for heteroskedasticity by panel.

Am I missing a better solution?  If not, which would you recommend?


Philip Bromiley
Dean's Professor of Strategic Management
Merage School of Business
University of California, Irvine
Irvine, CA  92697-3125
(949) 824-6657

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