Dear,

I have a question regarding the first year markup estimate that I get from the command "prodest".
I use Cobb-Douglas PF, and closely follow De Loecker & Warzynski (2012) for markup estimation.

I am not sure how the markup estimate is computed for the first year of my data, for which the period of my analysis is 2008-2014.
Given the embedded algorithm and their methodology(see below), I need the lag value of each observation in the law of motion of productivity: I have no lagged observations for the year 2008 to calculate the omega_lag. Then, omega for the year 2008 cannot be calculated due to the absence of value for XI (the innovation error term for law of motion of productivity).

Thus, I would expect not to have markup estimates for the first year of my data (2008), but my results even include the markup estimate for the year 2008.
In "Prodest", how is the markup calculated for the year of the dataset (2008)?


Below is the part of mata that I extract from De Loecker & Warzynski (2012).
mata:
void GMM_DLW(todo,betas,crit,g,H)
PHI=st_data(.,("phi"))
PHI_LAG=st_data(.,("phi_lag"))
Z=st_data(.,("const","l_lag","k"))
X=st_data(.,("const","l","k"))
X_lag=st_data(.,("const","l_lag","k_lag"))
Y=st_data(.,("y"))
C=st_data(.,("const"))

OMEGA=PHI-X*betas'
OMEGA_lag=PHI_LAG-X_lag*betas'
OMEGA_lag_pol=(C,OMEGA_lag)
g_b = invsym(OMEGA_lag_pol'OMEGA_lag_pol)*OMEGA_lag_pol' OMEGA
XI=OMEGA-OMEGA_lag_pol*g_b
crit=(Z'XI)'(Z'XI)
}