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st: Testing for endogeneity with ivreg2


From   "Shaw, Jim (NIH/NCI)" <shawjim@mail.nih.gov>
To   "Statalist (E-mail)" <statalist@hsphsun2.harvard.edu>
Subject   st: Testing for endogeneity with ivreg2
Date   Thu, 24 Jul 2003 07:10:26 -0400

Dear Statalist:

Does anyone know how the orthog option is used to test for endogeneity with
ivreg2?  Suppose I have 2 models (with clustering) where

y1 = y2 + x1 + x2 + x3

and 

y2 = x1 + x4 + x5

Using ivreg2 to estimate the first model via GMM, the command would look
something like this:

ivreg2 y1 (y2 = x4 x5) x1 x2 x3 , gmm robust cluster(subjid)

I would like to test whether y2 is orthogonal to the errors.  My
understanding is that, if that were the case, OLS would be consistent and
more efficient than the IV estimator.  Actually, I suspect that the OLS
alternative to the GMM IV estimator would be heteroscedastic OLS (HOLS).  Is
this correct?

--
James Shaw
Research Associate
College of Pharmacy
The University of Arizona
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