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st: RE: Testing for endogeneity with ivreg2


From   "Steven Stillman (LMPG)" <Steven.Stillman@lmpg.dol.govt.nz>
To   "'statalist@hsphsun2.harvard.edu'" <statalist@hsphsun2.harvard.edu>
Subject   st: RE: Testing for endogeneity with ivreg2
Date   Mon, 28 Jul 2003 12:26:48 +1200

I posted this incorrect response to a question last week.  The suspect
endogenous variable needs to be included in the exogenous variable list as
well as in the orthog option.  

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

Steve

> -----Original Message-----
> From:	Steven Stillman (LMPG) 
> Sent:	Friday, July 25, 2003 12:33 PM
> To:	'statalist@hsphsun2.harvard.edu'
> Subject:	RE: Testing for endogeneity with ivreg2
> 
> Jim,
> You are 90% of the way to getting your endogeneity test.  As you state,
> HOLS is the appropriate alternative for GMM IV.  To test for endogeneity
> in this context, run the HOLS model with your suspect endogenous variable
> in the orthog option.  So in your example the syntax would be:
> 
> ivreg2 y1 ( = x4 x5) x1 x2 x3 , gmm robust cluster(subjid) orthog(y2)
> 
> Steve
> 
> 
> 
> 
> 
> 
> 	-----Original Message-----
> 	From:	Shaw, Jim (NIH/NCI) [SMTP:shawjim@mail.nih.gov]
> 	Sent:	Thursday, July 24, 2003 11:10 PM
> 	To:	Statalist (E-mail)
> 	Subject:	st: Testing for endogeneity with ivreg2
> 
> 	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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