Modelling the dynamics of market shares in a pooled data setting: econometric and empirical issues

Felicitas Nowak-Lehmann
Dierk Herzer
Sebastian Vollmer
Inmaculada Martínez-Zarzoso

Abstract

The objective of this article is twofold. First, it is to study the applicability of the widely used Autoregressive Distributed Lag Model (ARDL) in a pooled data setting. Second, it is to analyse Chile's market shares in the EU during the period 1988 to 2002, pointing to application problems that might jeopardize the model and searching for estimation methods that deal with the problem of inter-temporal and cross-sectional correlation of the disturbances. To estimate the coefficients of the ARDL model, Feasible Generalized Least Squares (FGLS) is utilized within the Three-Stage Least Squares (3SLS) and the nonstandard Generalized Method of Moments (GMM) frameworks. A computation of errors is added to highlight the susceptibility of the model to problems related to the underlying model assumptions.