Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2001-01-17
Number: 01-006/4
Author-Name: Maurice J.G. Bun
Author-Email: m.j.g.bun@uva.nl
Author-Name: Jan F. Kiviet
Author-Email: jfk@fee.uva.nl
Author-Workplace-Name: University of Amsterdam
Title: The Accuracy of Inference in Small Samples of Dynamic Panel Data Models
Abstract: Through Monte Carlo experiments the small sample behavior is examinedof various inference techniques for dynamic panel data models whenboth the time-series and cross-section dimensions of the data set aresmall. The LSDV technique and corrected versions of it are comparedwith IV and GMM regarding: coefficient bias, accuracy of varianceestimators - both of the disturbances and of the coefficientestimators - and the actual size of coefficient tests. A reasonablysimple and consistent bias adjusted LSDV estimator, for which we findan analytical and a bootstrap consistent estimator of its variance,performs relatively well. Further higher-order refinements of thebias correction do not improve the accuracy considerably. Mosttechniques show substantial size distortions for asymptotic t tests.Finally, it is illustrated how these findings help to interpretempirical results on the relationship between so-called dynamicexternalities and local economic activity in Moroccan urban areas.
File-Url: https://papers.tinbergen.nl/01006.pdf
File-Format: application/pdf
File-Size: 465940 bytes
Handle: RePEc:tin:wpaper:20010006