Transcription of GMM ESTIMATION WITH PERSISTENT PANEL DATA: Key …
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GMM ESTIMATION WITH PERSISTENT PANEL DATA: Key …
Downloaded By: [University College London] At: 16:01 25 June 2007 ECONOMETRIC REVIEWS, 19(3), 32 1-340 (2000) GMM ESTIMATION WITH PERSISTENT PANEL data : AN APPLICATION TO PRODUCTION FUNCTIONS Richard Blundell University College London and Institute for Fiscal Studies Stephen Bond Nuffield College, Oxford and Institute for Fiscal Studies Key Words and Phrases: PANEL data ; GMM; production functions JEL classification: C23, D24 ABSTRACT This paper considers the ESTIMATION of Cobb-Douglas production functions using PANEL data covering a large sample of companies observed for a small number of time periods. GMM estimators have been found to produce large finite-sample biases when using the standard first-differenced estimator. These biases can be dramatically reduced by exploiting reasonable stationarity restrictions on the initial conditions process. Using data for a PANEL of R&D- performing US manufacturing companies we find that the additional instruments used in our extended GMM estimator yield much more reasonable parameter estimates.
Downloaded By: [University College London] At: 16:01 25 June 2007 GMM ESTIMATION WITH PERSISTENT PANEL DATA 327 0.8 or 0.9. For the first-differenced GMM estimator we …
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