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INSTRUMENTAL VARIABLES ESTIMATION WITH PANEL DATA

Published online by Cambridge University Press:  19 July 2005

Jeffrey M. Wooldridge
Jeffrey M. Wooldridge
Affiliation:
Michigan State University
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Abstract

The system two stage least squares estimator for the linear panel data model is shown to have different characterizations depending on the choice of instrument matrix. The more general estimator, where, in effect, separate reduced form linear projections are estimated for each time period, also has the advantage of being applicable when the number of instruments changes across time periods. The issue of efficient estimation is also treated.

Type
NOTES AND PROBLEMS
Information
Econometric Theory , Volume 21 , Issue 4 , August 2005 , pp. 865 - 869
Copyright
© 2005 Cambridge University Press

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References

REFERENCES

Arellano, M. & S.R. Bond (1991) Some specification tests for panel data models: Monte Carlo evidence and an application to employment equations. Review of Economic Studies 58, 277–298.Google Scholar
Wooldridge, J.M. (2002) Econometric Analysis of Cross Section and Panel Data. MIT Press.