Dynamic panel data modelling using maximum likelihood: an alternative to Arellano-Bond

Enrique Moral-Benito, Paul Allison () and Richard Williams ()
Additional contact information
Paul Allison: University of pennsylvania
Richard Williams: University of Notre Dame

No 1703, Working Papers from Banco de España

Abstract: The Arellano and Bond (1991) estimator is widely-used among applied researchers when estimating dynamic panels with fixed effects and predetermined regressors. This estimator might behave poorly in finite samples when the cross-section dimension of the data is small (i.e. small N), especially if the variables under analysis are persistent over time. This paper discusses a maximum likelihood estimator that is asymptotically equivalent to Arellano and Bond (1991) but presents better finite sample behaviour. Moreover, the estimator is easy to implement in Stata using the xtdpdml command as described in the companion paperWilliams et al. (2016), which also discusses further advantages of the proposed estimator for practitioners.

Keywords: dynamic panel data; maximum likelihood estimation (search for similar items in EconPapers)
JEL-codes: C23 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2017-01
New Economics Papers: this item is included in nep-ecm and nep-ets
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Dynamic panel data modelling using maximum likelihood: an alternative to Arellano-Bond (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:1703

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