One of the major virtues of panel data models is the possibility to control for unobserved and unobservable heterogeneity at the unit (individual, firm, sector...) level, even when this is correlated with the variables included on the right hand side of the equation. By assuming an additive...

A dramatically large number of corner solutions occur when estimating by (Gaussian) maximum likelihood a simple model for panel data with random effects and autocorrelated errors. This can invalidate results of applications to panel data with a short time dimension, even in a correctly specified...

Within the framework of dynamic panel data models with mean stationarity, one additional moment condition may remarkably increase the efficiency of the system GMM estimator. This additional condition is essentially a condition of “homoskesdasticity” of the individual effects; it is...

Negative values for estimated variances can arise in a panel data context. Empirical and theoretical literature dismisses the problem as not serious and a practical solution is to replace negative variances by its boundary value, i.e. zero. While this is not a concern when the individual...

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...