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RE: st: 3SLS with forward differencing


From   "Schaffer, Mark E" <[email protected]>
To   "[email protected]" <[email protected]>
Subject   RE: st: 3SLS with forward differencing
Date   Mon, 25 Nov 2013 22:26:15 +0000

Anirudh,

> -----Original Message-----
> From: [email protected] [mailto:owner-
> [email protected]] On Behalf Of Anirudh Tagat
> Sent: 25 November 2013 12:34
> To: statalist
> Subject: Re: st: 3SLS with forward differencing
> 
> Dear Billy,
> 
> My apologies for not following the statalist rules more precisely. I am hopeful
> that this reply conforms more closely to the list
> rules/etiquette:
> 
> I am currently trying to run an estimation following Mattias Lundberg and Lyn
> Squire, "The Simultaneous Evolution of Growth and Inequality", The Economic
> Journal , Vol. 113, No. 487 (Apr., 2003), pp. 326-344) -- where the efficient
> estimation methodology used was derived from Keane and Runkle, "On the
> Estimation of Panel-Data Models with Serial Correlation When Instruments Are
> Not Strictly Exogenous", Journal of Business & Economic Statistics , Vol. 10, No.
> 1 (Jan., 1992), pp. 1-9.
> 
> I am using Stata 12.1, and dealing with dynamic panel  data similar to that
> commonly found in cross-country analyses (4 periods, across 200 observations),
> and would like to use first-differencing (alternatively forward differencing) in
> line with the above mentioned studies. So far, I have not been clear on how this
> is best achieved, and if the
> -reg3- or -ivreg2- (or -xtabond2- (David Roodman, 2003. "XTABOND2:
> Stata module to extend xtabond dynamic panel data estimator,"
> Statistical Software Components S435901, Boston College Department of
> Economics, revised 22 Sep 2013.), which is close but does not follow Keane and
> Runkle) function is indeed the appropriate tool. Any suggestions on how to run
> this estimation (or at least implementing the transformation) using Stata would
> be most welcome.

Keane-Runkle is a kind of panel GLS estimator that assumes a form serial correlation that is invariant across panels.  A short and clear description of KR and how to implement it is in Baltagi's "Econometric Analysis of Panel Data" (I have the 4th edition at hand, and it's on p. 162).  Another simple and clear description of how to do it is in Baltagi's chapter in Nigar Hashimzade, Michael A. Thornton (eds), Handbook of Research Methods and Applications in Empirical Macroeconomics, pp. 240-1.

As far as I know, no one has implemented this in Stata, so you'd need to do it by hand yourself.  But based on Baltagi's explanation, it doesn't look too bad.

HTH,
Mark

> 
> Many thanks
> Anirudh Tagat
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