Initial Conditions and Moment Restrictions in Dynamic Panel Data Models.

Book section

Estimation of the dynamic error components model is considered using two alternative linear estimators that are designed to improve the properties of the standard first-differenced generalized method of moments (GMM) estimator. Both estimators require restrictions on the initial conditions process. Asymptotic efficiency comparisons and Monte Carlo simulations for the simple AR(1) model demonstrate the dramatic improvement in performance of the proposed estimators compared to the usual first-differenced GMM estimator, and compared to nonlinear GMM. The importance of these results is illustrated in an application to the estimation of a labor demand model using company panel data.

Authors: Blundell, R; Bond, S

• Publisher: Elgar
• Host title: Recent developments in the econometrics of panel data
• Place of publication: Cheltenham, U.K. and Northampton, Mass.
• Publication date: 2002-01-01
• ISBN: 1-84064-967-4
• Language: English