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In this paper, we investigate the weak instruments problem of the generalized method of moments (GMM) estimator for dynamic panel data models. Bun and Windmeijer (2010) demonstrate that the system GMM estimator combining models in first differences and levels suffers from the weak instruments problem when the variance ratio of the individual fixed effects to the errors is large, mainly because of the model in levels. In this paper, we alternatively consider first-difference and level models transformed by using the forward GLS transformation and demonstrate that this transformation yields a higher concentration parameter compared with the original models. This finding indicates that the proposed transformation yields stronger instruments despite the same first-differenced variables being used as instruments. The Monte Carlo simulation results show that the system GMM estimator for the transformed model, called the forward system GMM estimator, performs better than the conventional system GMM estimator for the first-difference and level models and that the performance of the new system GMM estimator is reasonable even when the variance ratio is large.
In the 16th Edition of Advances in Econometrics we present twelve papers discussing the current interface between Marketing and Econometrics. The authors are leading scholars in the fields and introduce the latest models for analysing marketing data. The papers are representative of the types of problems and methods that are used within the field of marketing. Marketing focuses on the interaction between the firm and the consumer. Economics encompasses this interaction as well as many others. Economics, along with psychology and sociology, provides a theoretical foundation for marketing.
This textbook offers a comprehensive introduction to panel data econometrics, an area that has enjoyed considerable growth over the last two decades. Micro and Macro panels are becoming increasingly available, and methods for dealing with these types of data are in high demand among practitioners. Software programs have fostered this growth, including freely available programs in R and numerous user-written programs in both Stata and EViews. Written by one of the world’s leading researchers and authors in the field, Econometric Analysis of Panel Data has established itself as the leading textbook for graduate and postgraduate courses on panel data. It provides up-to-date coverage of basic panel data techniques, illustrated with real economic applications and datasets, which are available at the book’s website on springer.com. This new sixth edition has been fully revised and updated, and includes new material on dynamic panels, limited dependent variables and nonstationary panels, as well as spatial panel data. The author also provides empirical illustrations and examples using Stata and EViews. “This is a definitive book written by one of the architects of modern, panel data econometrics. It provides both a practical introduction to the subject matter, as well as a thorough discussion of the underlying statistical principles without taxing the reader too greatly." Professor Kajal Lahiri, State University of New York, Albany, USA. "This book is the most comprehensive work available on panel data. It is written by one of the leading contributors to the field, and is notable for its encyclopaedic coverage and its clarity of exposition. It is useful to theorists and to people doing applied work using panel data. It is valuable as a text for a course in panel data, as a supplementary text for more general courses in econometrics, and as a reference." Professor Peter Schmidt, Michigan State University, USA. “Panel data econometrics is in its ascendancy, combining the power of cross section averaging with all the subtleties of temporal and spatial dependence. Badi Baltagi provides a remarkable roadmap of this fascinating interface of econometric method, enticing the novitiate with technical gentleness, the expert with comprehensive coverage and the practitioner with many empirical applications.” Professor Peter C. B. Phillips, Cowles Foundation, Yale University, USA.
Written by one of the world's leading researchers and writers in the field, Econometric Analysis of Panel Data has become established as the leading textbook for postgraduate courses in panel data. This new edition reflects the rapid developments in the field covering the vast research that has been conducted on panel data since its initial publication. Featuring the most recent empirical examples from panel data literature, data sets are also provided as well as the programs to implement the estimation and testing procedures described in the book. These programs will be made available via an accompanying website which will also contain solutions to end of chapter exercises that will appear in the book. The text has been fully updated with new material on dynamic panel data models and recent results on non-linear panel models and in particular work on limited dependent variables panel data models.
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The system GMM estimator developed by Blundell and Bond (1998) for dynamic panel data models has been widely used in empirical work; however, it does not perform well with weak instruments. This paper proposes a variation on the system GMM estimator, based on a simple transformation of the dependent variable. Simulation results indicate that, infinite samples, this transformed system GMM estimator greatly outperforms its conventional counterpart in estimating the coefficient of the lagged dependent variable, especially when the variation in the fixed effects is large relative to that in the idiosyncratic shocks and when the dependent variable is highly persistent. Applying this transformation also substantially strengthens the reliability of inferences on the overall model specification based upon the Sargan/Hansen test. As illustrations, the transformed system GMM estimator is applied to two empirical examples from the literature: a production function and an employment equation.
Reaching beyond the usual terrain of economic engagement, this edited collection confronts critical issues to demand urgent analytical attention and a harnessing of the economic potential at stake.
This book highlights the key areas where inequalities are created and where new policies are required, including the consequences of current consolidation policies, structural labour market changes with rising non-standard work and job polarisation, persisting gender gaps...