Thanks very much for your answer, Brian.
Based on your two messages I conclude that my best shot would probably be to
use xtdata for equation 2, then use gmm for the system of two equations,
while the first one would be the differences equation, and the second one
would be the level equation. This way I could address the fixed effects in
both (though not rigorous enough by xtdata), and still have the system
standard errors taken care of.
An alternative would be to run a differences gmm first of equation 2 alone,
predict the dependent variable, and use that result for the level equation
in the simultaneous gmm of both equations.
Do you prefer one of the two strategies I suggested, or would you advise
differently?
Your input is highly appreciated
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