Re: st: heteroscedasticity in dymamic fixed effects (or LSDV) models

[joales salbdralor <joalessakafiora@googlemail.com>]

thank you christopher

On 6/10/12, Christopher Baum <kit.baum@bc.edu> wrote:
> <>
> On Jun 10, 2012, at 8:33 AM, Joales wrote:
>
>>
>> I have a usual panel data set on some variables that evolve across
>> time and countries.
>>
>> I set up a dynamic panel fixed effects model
>>
>> and I test for heteroscedasticity using xttest3. So my next step is to
>> use
>>
>> xtreg  dependent variable, lagged dependent, rest variables , fe
>> cluster(id)
>>
>> where id is the usual panel identifier.
>> Checking for heteroscedasticity (using again xttest)  I still find
>> that I have heteroscedasticity.
>>
>> IS there any problem in my approach?
>
> Yes. It is called Nickell bias (Econometrica, 1981). That is why we have the
> Anderson-Hsiao and Arellano-Bond/Blundell-Bond estimators.
> Computing robust standard errors will generally deal with heteroskedasticiy
> in this context, and is commonly applied. But you should not apply the fixed
> effects (LSDV) estimator in this context without computing the potential
> damage done by Nickell bias -- or better yet, apply an estimator without
> this bias such as those mentioned above.
>
> Kit
>
>
> Kit Baum   |   Boston College Economics & DIW Berlin   |
> http://ideas.repec.org/e/pba1.html
>                              An Introduction to Stata Programming  |
> http://www.stata-press.com/books/isp.html
>   An Introduction to Modern Econometrics Using Stata  |
> http://www.stata-press.com/books/imeus.html
>
>
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