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Efficiency comparisons for a system GMM estimator in dynamic panel data models

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  • Frank Windmeijer

    (Institute for Fiscal Studies and University of Bristol)

Abstract

The system GMM estimator in dynamic panel data models combines moment conditions for hte differenced equation with moment conditions for the model in levels. An initial optimal weight matrix under homoscedasticity and non-serial correlation is not known for this estimation procedure. It is common practice to use the inverse of the moment matrix of the instruments as the initial weight matrix. This paper assesses the potential efficiency loss from the use of this weight matrix using the efficiency bounds as derived by Liu and Neudecker (1997).

Suggested Citation

  • Frank Windmeijer, 1998. "Efficiency comparisons for a system GMM estimator in dynamic panel data models," IFS Working Papers W98/01, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:ifsewp:98/01
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    File URL: http://www.ifs.org.uk/wps/wp9801.pdf
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    References listed on IDEAS

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    1. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
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    3. 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.
    4. S. Liu & H. Neudecker, 1997. "Kantorovich inequalities and efficiency comparisons for several classes of estimators in linear models," Statistica Neerlandica, Netherlands Society for Statistics and Operations Research, vol. 51(3), pages 345-355, November.
    5. Ahn, Seung C. & Schmidt, Peter, 1995. "Efficient estimation of models for dynamic panel data," Journal of Econometrics, Elsevier, vol. 68(1), pages 5-27, July.
    6. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
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    Cited by:

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    2. Sebastian Kripfganz & Claudia Schwarz, 2019. "Estimation of linear dynamic panel data models with time‐invariant regressors," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 34(4), pages 526-546, June.
    3. Derek Jones & Panu Kalmi & Mikko Mäkinen, 2010. "The productivity effects of stock option schemes: evidence from Finnish panel data," Journal of Productivity Analysis, Springer, vol. 33(1), pages 67-80, February.
    4. Lalanne, Marie & Seabright, Paul, 2011. "The Old Boy Network: Gender Differences in the Impact of Social Networks on Remuneration in Top Executive Jobs," IDEI Working Papers 689, Institut d'Économie Industrielle (IDEI), Toulouse.
    5. Farid Gasmi & Paul Noumba Um & Laura Recuero Virto, 2009. "Political Accountability and Regulatory Performance in Infrastructure Industries: An Empirical Analysis," The World Bank Economic Review, World Bank, vol. 23(3), pages 509-531, October.
    6. Angelica Gonzalez, 2007. "Angelica Gonzalez," Edinburgh School of Economics Discussion Paper Series 168, Edinburgh School of Economics, University of Edinburgh.

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