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Estimation and inference in dynamic unbalanced panel-data models with a small number of individuals

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  • Giovanni S. F. Bruno

    (Istituto di Economia Politica, Bocconi University, Milan)

Abstract

This article describes a new Stata routine, xtlsdvc, that computes bias-corrected least-squares dummy variable (LSDV) estimators and their boot- strap variance-covariance matrix for dynamic (possibly) unbalanced panel-data models with strictly exogenous regressors. A Monte Carlo analysis is carried out to evaluate the finite-sample performance of the bias-corrected LSDV estimators in comparison to the original LSDV estimator and three popular N-consistent estimators: Arellano-Bond, Anderson-Hsiao and Blundell-Bond. Results strongly sup- port the bias-corrected LSDV estimators according to bias and root mean squared error criteria when the number of individuals is small. Copyright 2005 by StataCorp LP.

Suggested Citation

  • Giovanni S. F. Bruno, 2005. "Estimation and inference in dynamic unbalanced panel-data models with a small number of individuals," Stata Journal, StataCorp LP, vol. 5(4), pages 473-500, December.
    • Handle: RePEc:tsj:stataj:v:5:y:2005:i:4:p:473-500
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    References listed on IDEAS

    as
    1. Bun, Maurice J. G. & Kiviet, Jan F., 2003. "On the diminishing returns of higher-order terms in asymptotic expansions of bias," Economics Letters, Elsevier, vol. 79(2), pages 145-152, May.
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    3. Kiviet, Jan F., 1995. "On bias, inconsistency, and efficiency of various estimators in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 68(1), pages 53-78, July.
    4. Stephen Bond, 2002. "Dynamic panel data models: a guide to microdata methods and practice," CeMMAP working papers CWP09/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    5. Judson, Ruth A. & Owen, Ann L., 1999. "Estimating dynamic panel data models: a guide for macroeconomists," Economics Letters, Elsevier, vol. 65(1), pages 9-15, October.
    6. Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 47-82, January.
    7. Bruno, Giovanni S.F., 2005. "Approximating the bias of the LSDV estimator for dynamic unbalanced panel data models," Economics Letters, Elsevier, vol. 87(3), pages 361-366, June.
    8. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    9. Hsiao,Cheng & Pesaran,M. Hashem & Lahiri,Kajal & Lee,Lung Fei (ed.), 1999. "Analysis of Panels and Limited Dependent Variable Models," Cambridge Books, Cambridge University Press, number 9780521631693, September.
    10. Stephen R. Bond, 2002. "Dynamic panel data models: a guide to micro data methods and practice," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 1(2), pages 141-162, August.
    11. David Roodman, 2003. "XTABOND2: Stata module to extend xtabond dynamic panel data estimator," Statistical Software Components S435901, Boston College Department of Economics, revised 11 Jul 2024.
    12. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-1426, November.
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    More about this item

    Keywords

    xtlsdvc; bias approximation; unbalanced panels; dynamic panel data; LSDV estimator; Monte Carlo experiment; bootstrap variance-covariance;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General

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