differenceGMM
differenceGMM is a statistical modeling technique that combines the principles of generalized method of moments (GMM) with differencing strategies to address issues such as unobserved heterogeneity and endogeneity in panel data analysis. This approach is particularly useful in econometrics for estimating parameters when traditional assumptions—such as exogeneity—are violated.
The core idea behind differenceGMM is to transform the original data by differencing, which effectively removes
differenceGMM was popularized by Arellano and Bond in their 1991 paper, which introduced a dynamic panel-data
Practically, the implementation involves specifying moment conditions based on lagged levels or differences of variables as
Overall, differenceGMM is a powerful tool in econometrics for addressing common issues in panel data analysis,