I have been playing with more examples, and I now know that with larger NF's my example code actually produces a result, instead of a singular matrix error. interestingly, stata's xtabond2 command seems ok with these sorts of data sets. either R has more stringent requirements, or stata is too casual. in any case, I find it strange that Blundell-Bond would not work on data sets in which N=20 and T=10, and there is only one parameter to estimate. there should be more than enough degrees of freedom. I will experiment more with it. regards, /iaw