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Semiparametric Estimation of Partially Linear Dynamic Panel Data Models with Fixed Effects

aSchool of Economics, Singapore Management University, Singapore
bSchool of Economics, Renmin University of China, Beijing, People’s Republic of China

Essays in Honor of Aman Ullah

ISBN: 978-1-78560-787-5, eISBN: 978-1-78560-786-8

Publication date: 23 June 2016

Abstract

In this paper, we study a partially linear dynamic panel data model with fixed effects, where either exogenous or endogenous variables or both enter the linear part, and the lagged-dependent variable together with some other exogenous variables enter the nonparametric part. Two types of estimation methods are proposed for the first-differenced model. One is composed of a semiparametric GMM estimator for the finite-dimensional parameter θ and a local polynomial estimator for the infinite-dimensional parameter m based on the empirical solutions to Fredholm integral equations of the second kind, and the other is a sieve IV estimate of the parametric and nonparametric components jointly. We study the asymptotic properties for these two types of estimates when the number of individuals N tends to and the time period T is fixed. We also propose a specification test for the linearity of the nonparametric component based on a weighted square distance between the parametric estimate under the linear restriction and the semiparametric estimate under the alternative. Monte Carlo simulations suggest that the proposed estimators and tests perform well in finite samples. We apply the model to study the relationship between intellectual property right (IPR) protection and economic growth, and find that IPR has a non-linear positive effect on the economic growth rate.

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Acknowledgements

Acknowledgements

The authors thank the editors, three referees, Aman Ullah, and the participants at the AIE Conference in Honor of Aman Ullah for valuable comments. Su gratefully acknowledges the Singapore Ministry of Education for Academic Research Fund under Grant Number MOE2012-T2-2-021 and the funding support provided by the Lee Kong Chian Fund for Excellence. Zhang gratefully acknowledges the Renmin University of China for Academic Research Fund under Grant Number 14XNF045.

Citation

Su, L. and Zhang, Y. (2016), "Semiparametric Estimation of Partially Linear Dynamic Panel Data Models with Fixed Effects", Essays in Honor of Aman Ullah (Advances in Econometrics, Vol. 36), Emerald Group Publishing Limited, Leeds, pp. 137-204. https://doi.org/10.1108/S0731-905320160000036014

Publisher

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Emerald Group Publishing Limited

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