GMM Estimation with persistent panel data: an application to production functions
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- 1 January 2000
- journal article
- research article
- Published by Taylor & Francis in Econometric Reviews
- Vol. 19 (3) , 321-340
- https://doi.org/10.1080/07474930008800475
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 estimatorshave 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&Dperforming US manufacturing companies we find that the additional instruments used in our extended GMM estimator yield much more reasonable parameter estimates.Keywords
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