Efficient estimation of panel data models with strictly exogenous explanatory variables

With panel data, exogeneity assumptions imply many more moment conditions t han standard estimators use. However, many of the moment conditions may be redundant, in the sense that they do not increase efficiency; if so, we may establish the standard estimators' efficiency. We prove efficiency results for GLS in a model with unrestricted error covariance matrix, and for 3SLS in models where regressors and errors are correlated, such as the Hausman- Taylor model. For models with correlation between regressors and errors, an d with unrestricted error covariance structure, we provide a simple estimat or based on a GLS generalization of deviations from means. (C) 1999 Elsevie r Science S.A. All rights reserved. JEL classification. C13; C23.