Consistent estimation of dynamic panel data models with time-varying individual effects

Celine Nauges and Alban Thomas

Annals of Economics and Statistics, 2003, issue 70, 53-75

Abstract: This paper proposes a new specification for dynamic panel data models, where unobserved heterogeneity is modeled by the sum of the usual additive individual effect, and a multiplicative, time varying individual effect. We show that usual GMM estimators based on first-difference or quasi-difference transformations are generally inconsistent with our model specification, and we propose a consistent GMM estimation procedure based on a double-difference transformation. Small sample properties of alternative GMM estimators are investigated through Monte Carlo experiments.

Date: 2003
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Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:adr:anecst:y:2003:i:70:p:53-75

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