How to do Xtabond2: An Introduction to Difference and System GMM in Stata

The difference and system generalized method-of-moments estimators, developed by Holtz-Eakin, Newey, and Rosen (1988, Econometrica 56: 1371–1395); Arellano and Bond (1991, Review of Economic Studies 58: 277–297); Arellano and Bover (1995, Journal of Econometrics 68: 29–51); and Blundell and Bond (1998, Journal of Econometrics 87: 115–143), are increasingly popular. Both are general estimators designed for situations with “small T, large N″ panels, meaning few time periods and many individuals; independent variables that are not strictly exogenous, meaning they are correlated with past and possibly current realizations of the error; fixed effects; and heteroskedasticity and autocorrelation within individuals.…