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GMM estimation withpersistent paneldata: an applicationto productionfunctions Richard BlundellStephen Bond1999 год

GMM estimation with persistent panel data: an application to production functions
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Аннотация: We consider the estimation of Cobb-Douglas production functions using panel data covering a large sample of companies observed for a small number of time periods.Standard GMM estimators, which eliminate unobserved …rm-speci…c e¤ects by taking …rst di¤erences, have been found to produce unsatisfactory results in this context (Mairesse and Hall, 1996).We attribute this to weak instruments: the series on …rm sales, capital and employment are highly persistent, so that lagged levels are only weakly correlated with subsequent …rst di¤erences.As shown in Blundell and Bond (1998), this can result in large …nite-sample biases when using the standard …rst-di¤erenced GMM estimator.Blundell and Bond (1998) also show that these biases can be dramatically reduced by exploiting reasonable stationarity restrictions on the initial conditions process.This yields an extended GMM estimator in which lagged …rst-diferences of the series are also used as instruments for the levels equations (cf.Arellano and Bover, 1995).Using data for a panel of R&D-performing US manufacturing companies, similar to that in Mairesse and Hall (1996), we show that the instruments available for the production function in …rst di¤erences are indeed weak.We …nd that the additional instruments used in our extended GMM estimator appear to be both valid and informative in this context; this estimator yields much more reasonable parameter estimates.We also stress the importance of allowing for an autoregressive component in the productivity shocks."In empirical practice, the application of panel methods to micro-data produced rather unsatisfactory results: low and often insigni…cant capital coe¢cients and unreasonably low estimates of returns to scale."-Griliches and Mairesse (1997).
Год издания: 1999
Авторы: Richard Blundell, Stephen Bond
Источник: Working paper series - Institute for Fiscal Studies/Working papers
Ключевые слова: Global trade and economics, Monetary Policy and Economic Impact, Climate Change Policy and Economics
Другие ссылки: Working paper series - Institute for Fiscal Studies/Working papers (HTML)
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