Econometric Analysis of Panel Data

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Presentation transcript:

Econometric Analysis of Panel Data William Greene Department of Economics Stern School of Business

The Hausman and Taylor RE Model

A Useful Result: LSDV is an IV Estimator

Hausman and Taylor Use that Result

H&T’s FGLS Estimator

H&T’s FGLS Estimator (cont.)

H&T’s 4 STEP IV Estimator

The Hausman and Taylor Application: NLSY Wage Equation

Standard Textbook Application Based on Cornwell and Rupert

Is marital status really endogenous?

Dynamic (Linear) Panel Data (DPD) Models Application Bias in Conventional Estimation Development of Consistent Estimators Efficient GMM Estimators

THE Dynamic Linear Model

A General DPD model

OLS and GLS are inconsistent

LSDV is Also Inconsistent [(Steven) Nickell Bias]

IV Estimation of the DPD Model Anderson Hsiao IV Estimator

Arellano and Bond Estimator - 1

Arellano and Bond Estimator - 2

Ahn and Schmidt

Arellano/Bond/Bover’s Formulation Start with H&T

Arellano/Bond/Bover’s Formulation Dynamic Model

Arellano/Bond/Bover’s Formulation

Arellano/Bond/Bover Estimator

GMM Criterion

Application: Maquiladora

Maquiladora

Postscript There is no theoretical guidance on the instrument set There is no theoretical guidance on the form of the covariance matrix There is no theoretical guidance on the number of lags at any level of the model There is no theoretical guidance on the form of the exogeneity – and it is not testable. Results vary wildly with small variations in the assumptions.

Appendix

The Panel Data Case

GMM Estimation for One Equation

GMM for a System of Equations

SUR Model with Endogenous RHS Variables

GMM for the System - Notation

Instruments

Moment Equations

Estimation-1

Estimation-2

Estimation-3

Estimation-4

Estimation-5

Arellano and Bond Estimator - 3

Arellano and Bover Instrumental Variables Approach

Simple IV Estimation

Arellano/Bond/Bover’s Formulation These blocks may contain all previous exogenous variables, or all exogenous variables for all periods. This may contain the all periods of data on x1 rather than just the group mean. (Amemiya and MaCurdy).

Arellano/Bond/Bover’s Formulation

Arellano/Bond First Difference Formulation

Arellano/Bond - GLS

Arellano/Bond GLS Estimator

GMM Estimator

http://people. stern. nyu http://people.stern.nyu.edu/wgreene/CumulantInstruments-Racicot-AE(2014)_46(10).pdf

The NYU No Action Letter

Arellano/Bond/Bover’s Formulation For unbalanced panels the number of columns for Zi varies. Given the form of Zi, the number of columns depends on Ti. We need all Zi to have the same number of columns. For matrices with less columns than the largest one, extra columns of zeros are added.