Re: st: RE: xtabond2 estimation and observations used

[webgeeky <webgeeky@gmail.com>]

I created  four time dummies (e.g. t1 = 1 if the observation is for
period 1), and entered t* in the xtabond2 model. I've also included a
lagged dependent variable (LDV) in the model. The message is:

t1 dropped due to collinearity
t4 dropped due to collinearity

I noticed that t1 and t4 are also dropped when I use xtreg with a LDV.
However, when the LDV is excluded, only t4 is dropped.

So I guess the LDV is the cause of the "problem" here. A question is,
why are the extremes time periods dropped with LDV included? It is
more intuitive if t1 and t2 are dropped.

Webber Geelang

On Sun, Aug 18, 2013 at 8:56 PM, DE SOUZA Eric
<eric.de_souza@coleurope.eu> wrote:
> Since we do not know how you have created your time dummies, nor what instruction you entered, it is difficult to answer.
>
> Create four time dummies, t1 to t4, and enter them into your command as t*. Then see what happens and report, if necessary.
>
>
> Eric de Souza
> College of Europe
> Brugge (Bruges), Belgium
> http://www.coleurope.eu
>
>
>
> -----Original Message-----
> From: owner-statalist@hsphsun2.harvard.edu [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of webgeeky
> Sent: 17 August 2013 16:34
> To: statalist@hsphsun2.harvard.edu
> Subject: st: xtabond2 estimation and observations used
>
> I've a question regarding the mechanism of xtabond2. I've read Roodman
> (2009) in Stata Journal, but there are some aspects that I couldn't figure out.
>
> I have a balanced dataset that involves 4 time periods. I estimated a one-step difference GMM using xtabond2 with a lagged dependent variable (one-period lag) and the "nolevel" option. I included 3 time period dummies (t1, t2, t3) in the model.
>
> The output from the estimation shows that the number of observations per group (min/avg/max) is 2. The total number of observations is half that of my sample size. These figures are consistent with what the one-step difference GMM, where observations in the first two periods are dropped.
>
> What puzzle me is that there is an estimated coefficient for the 2nd time period (t2), while t1 is dropped from the model. I would like to know why t2 is being estimated even though the observations used in the estimation should be those in t3 and t4?
>
> Thanks!
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