Indirect inference for dynamic panel models

Maximum likelihood (ML) estimation of the autoregressive parameter of a dynamic panel data model with fixed effects is inconsistent under fixed time series sample size and large cross section sample size asymptotics. This paper proposes a general, computationally inexpensive method of bias reduction that is based on indirect inference, shows unbiasedness and analyzes efficiency. Monte Carlo studies show that our procedure achieves substantial bias reductions with only mild increases in variance, thereby substantially reducing root mean square errors. The method is compared with certain consistent estimators and is shown to have superior finite sample properties to the generalized method of moment (GMM) and the bias-corrected ML estimator.     

On e-business strategy planning and performance: a comparative study of the UK and Greece

In this research study the effect of Financial and Non-Financial performance of organisations on e-business strategy planning is investigated. The strategic planning parameters of Phillips model are examined when applied to e-business strategy planning. The relationships between these parameters, that is, Formality, Participation, Sophistication and Thoroughness, and Financial and Non-Financial Performance, are examined and the directions of these relationships are investigated. A conceptual model has been constructed and quantitative research methods are used to test four hypotheses. The proposed e-business model was tested in two EU countries, the UK and Greece. A synoptic statistical analysis and comparative numerical results are given showing that in both countries Participation has a positive relationship with Financial Performance and Formality has a positive relationship with Non-Financial Performance. The proposed model is extendable and valid in countries other than the UK and Greece, thus being able to be adapted to and used in other national environments.     

Estimation of a Stratified Error‐Components Model*

This article shows that the presence of incidental parameters in Baltagi and Griffin's (International Economic Review 29 (1988), 745–53) generalized error‐components model implies there is no guarantee feasible and true GLS estimators have the same asymptotic distribution. The article then considers a related stratified error‐components model that has no incidental parameters. In this model, unobserved heterogeneity occurs through variances changing across strata. The article provides an EM algorithm for calculating estimates of the model's parameters without assuming observations can be classified into strata, derives a bootstrap test for identifying the number of strata, and applies the new methods in an example.     

How Does Industry Affect Firm Financial Structure?

We examine the importance of industry to firm-level financialand real decisions. We find that in addition to standard industryfixed effects, financial structure also depends on a firm’sposition within its industry. In competitive industries, a firm’sfinancial leverage depends on its natural hedge (its proximityto the median industry capital–labor ratio), the actionsof other firms in the industry, and its status as entrant, incumbent,or exiting firm. Financial leverage is higher and less dispersedin concentrated industries, where strategic debt interactionsare also stronger, but a firm’s natural hedge is not significant.Our results show that financial structure, technology, and riskare jointly determined within industries. These findings areconsistent with recent industry equilibrium models of financialstructure.     

A sequential approach to testing for structural change in econometric models

The paper shows that the sequential approach to testing econometric models, particularly testing for structural change, is both feasible and potentially very useful. In fact, this paper makes clear the possibility of using the sequential approach as suggested by Dhrymes et al. (1972) and shows that the statistical dependence between successive tests can be overcome in some cases.Helpful comments by David Hendry, Grayham Mizon and Jan Kiviet, on an earlier version of a related Paper, are gratefully acknowledged.     

An Efficient Pursuit? Independent Shopkeeping in 1930s Britain

During the 1930s, the small-scale retailer was regarded by manycommentators as being responsible for the apparent inefficienciesof the retail trade in Britain. Using a range of documentaryevidence from the period, this article draws attention to debateon the merits of large- and small-scale retailers, highlightinga concern for the latter’s contribution to wider communitywell-being and to developments in retail trade practices. Therelative inefficiency of the small trader was frequently explainedin relation to a lack of awareness of sound shop management.Consequently, emphasis was placed by commentators on the needfor small traders to enhance their knowledge of retail managementpractices in order to improve their own competitive positionand efficiency in the retail trade more widely. Both the popularand trade press offered small traders a range of advice thatwas intended to improve their fortunes. This article considersthe form and content of such advice.     

Testing for serial correlation in simultaneous equation models: Some further results

In this paper approximate counterparts of the exact tests earlier proposed by the authors are examined. Type 1 error probabilities and test powers are estimated and compared using Monte Carlo experiments. The effect on the Type 1 error probabilities of the misspecification which results when serial correlation is present elsewhere in the system is also investigated.