SIMULTANEOUS-EQUATIONS AND PANEL DATA

This paper considers a simultaneous equations model, with panel data and unobservable individual effects in each structural equation. The effects may be fixed or random. In the fixed effects case, a conditional likelihood approach leads to the within transformation, just as in the single equation setting. In the random effects case, we allow an arbitrary number of the exogenous variables to be correlated with the effects, and provide efficient GMM estimators along the lines of two-stage and three-stage least squares. The case of different instruments in different equation is also considered.