Moment Conditions and Neglected Endogeneity in Panel Data Models

Giorgio Calzolari and Laura Magazzini

No 02/2011, Working Papers from University of Verona, Department of Economics

Abstract: This paper develops a new moment condition for estimation of linear panel data models. When added to the set of instruments devised by Anderson, Hsiao (1981, 1982) for the dynamic model, the proposed approach can outperform the GMM methods customarily employed for estimation. The proposal builds on the properties of the iterated GLS, that, contrary to conventional wisdom, can lead to a consistent estimator in particular cases where endogeneity of the explanatory variables is neglected. The targets achieved are a reduction in the number of moment conditions and a better performance over the most widely adopted techniques.

Keywords: panel data; dynamic model; GMM estimation; endogeneity (search for similar items in EconPapers)
JEL-codes: C23 (search for similar items in EconPapers)
Date: 2011-02
New Economics Papers: this item is included in nep-ecm
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Citations: View citations in EconPapers (2)

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