How to do xtabond2: An introduction to difference and system GMM in Stata
David Roodman ()
Stata Journal, 2009, vol. 9, issue 1, 86-136
The difference and system generalized method-of-moments estimators, developed by Holtz-Eakin, Newey, and Rosen (1988, Econometrica 56: 1371-1395); Arellano and Bond (1991, Review of Economic Studies 58: 277-297); Arellano and Bover (1995, Journal of Econometrics 68: 29-51); and Blundell and Bond (1998, Journal of Econometrics 87: 115-143), are increasingly popular. Both are general estimators designed for situations with "small T , large N" panels, meaning few time periods and many individuals; independent variables that are not strictly exogenous, meaning they are correlated with past and possibly current realizations of the error; fixed effects; and heteroskedasticity and autocorrelation within individuals. This pedagogic article first introduces linear generalized method of moments. Then it describes how limited time span and potential for fixed eﬀects and endogenous regressors drive the design of the estimators of interest, offering Stata-based examples along the way. Next it describes how to apply these estimators with xtabond2. It also explains how to perform the Arellano-Bond test for autocorrelation in a panel after other Stata commands, using abar. The article concludes with some tips for proper use. Copyright 2009 by StataCorp LP.
Keywords: xtabond2; generalized method of moments; GMM; Arellano-Bond test; abar (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (1166) Track citations by RSS feed
Downloads: (external link)
Working Paper: How to Do xtabond2: An Introduction to "Difference" and "System" GMM in Stata (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:tsj:stataj:v:9:y:2009:i:1:p:86-136
Ordering information: This journal article can be ordered from
Access Statistics for this article
Stata Journal is currently edited by H. Joseph Newton and Nicholas J. Cox
More articles in Stata Journal from StataCorp LP
Bibliographic data for series maintained by Christopher F. Baum ().