Also, how we can understand we have to for GMM model for our data? why do we go for different GMM models when there are random and fixed effect methods that can be decided by the Hausman test and which almost cover individual and time-specific effects? Also, to get entities' specific slope, we could use a random coefficient model or hierarchical regression model, right?
Thank you
I think this paper can help you Article How to do Xtabond2: An Introduction to Difference and System...
The GMM (Generalized Method of Moments) method is chosen for dynamic panel data where the econometric equations involve lags of the dependent variable as an estimator variables. For instance, in this case, the current workforce is influenced by the workforce in the previous period.
The presence of lagged variables in the econometric model may potentially result in Nickell bias, which cannot be addressed with random or fixed effect methods but can be overcome using the GMM method.
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