A comparison of dynamic panel data estimators: Monte Carlo evidence and an application to the investment function

Andreas Behr

No 2003,05, Discussion Paper Series 1: Economic Studies from Deutsche Bundesbank

Abstract: In our analysis we discuss several dynamic panel data estimators proposed in the literature and assess their performance in Monte Carlo simulations. It is a well known fact that the natural choice, the least squares dummy variable estimator is biased in the context of dynamic estimation. The estimators taking into account the resulting bias can be grouped broadly into the class of instrumental estimators and the class of direct bias corrected estimators. The simulation results clearly favour the direct bias corrected estimators, especially the estimator proposed by Hansen (2001). The superiority of these estimators decreases with growing numbers of individuals in the simulation. This is the well known fact of large sample properties of the GMM-methods. In the case of endogenous predetermined regressors, the system-estimator proposed by Blundell and Bond is unbiased and most efficient, while direct bias corrected estimators perform similar to the GMM-estimator proposed by Arellano and Bond (1991). Turning to the empirical comparison, we find that the different estimators lead to the same conclusions concerning the investment behaviour of German manufacturing firms based on the Deutsche Bundesbank's Corporate Balance Sheet Statistics. Investment is strongly positive dependent on lagged investment and Q. Nevertheless, in detail the differences of the estimated parameters are not negligible.

Keywords: dynamic panel data estimation; GMM; bias correction; investment (search for similar items in EconPapers)
JEL-codes: C15 C23 E22 (search for similar items in EconPapers)
Date: 2003
References: Add references at CitEc
Citations: View citations in EconPapers (42)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/19591/1/200305dkp.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdp1:4200

Access Statistics for this paper

More papers in Discussion Paper Series 1: Economic Studies from Deutsche Bundesbank Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics (econstor@zbw-workspace.eu).