Hello
I am attempting to estimate a dynamic panel data model using System-GMM (two-step). In doing so, I have been reading David Roodman (2009) paper on " How to do xtabond2: An introduction to difference and system GMM in Stata" along with Baltagi (2005) book on panel data.
My enquiry to the members is the following:
I am estimating say, Y(it) = alpha + Beta(1) X + Beta(2) Z; of which both X and Z are both endogenous. However, I would also like to examine a square term of the variable X.
But I am not sure whether one should incorporate a square term in the system-GMM estimation. This is because Roodman (2009) mentions that both Difference-GMM and System-GMM estimators are designed for a linear functional relationship?
Can one consider a square term in such an estimation method?
Many thanks,
Sagnik
I am attempting to estimate a dynamic panel data model using System-GMM (two-step). In doing so, I have been reading David Roodman (2009) paper on " How to do xtabond2: An introduction to difference and system GMM in Stata" along with Baltagi (2005) book on panel data.
My enquiry to the members is the following:
I am estimating say, Y(it) = alpha + Beta(1) X + Beta(2) Z; of which both X and Z are both endogenous. However, I would also like to examine a square term of the variable X.
But I am not sure whether one should incorporate a square term in the system-GMM estimation. This is because Roodman (2009) mentions that both Difference-GMM and System-GMM estimators are designed for a linear functional relationship?
Can one consider a square term in such an estimation method?
Many thanks,
Sagnik
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