Hi All:

I want to investigate the causality relationship between work and health. My model is like this:

health (i=work(it-1)+xb+e (1)
work(it)=work(it-1)+xb+u (2)

Health is continuous variable, work is categorical variable. It is a typical cross-lagged panel model. I know -xtdpdml-, -xtabond- and -cmp- can help me with this model. But I don't know which is more suitable.

If use -xtabond-, then I will use one lagged or twice lagged work value with first difference (FD) method, at the cost of losing two waves due to the lagged values.
If use-xtdpdml-, with fixed effect, it seems lagged work variable is still related with error term as lagged work is related with average error.
If use-cmp-, it seems fixed effect or first difference is not allowed. I am not sure whether Mundlak random effect is possible in -cmp-.

I would appreciate if you can give some suggestions on this.

Thank you,

Connie