This paper proposes a new instrumental variables estimator for a dynamic panel model with fixed effects with good bias and mean squared error properties even when identification of the model becomes weak near the unit circle. We adopt a weak instrument asymptotic approximation to study the behavior of various estimators near the unit circle. We show that an estimator based on long differencing the model is much less biased than conventional implementations of the GMM estimator for the dynamic panel model.
Long difference instrumental variables estimation for dynamic panel models with fixed effectJinyong Hahn, Jerry Hausman, and Guido Kuersteiner ,
2( 140 )
Journal of Econometrics