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st: RE: Stata/Econometric question


From   "Steven Stillman (LMPG)" <Steven.Stillman@lmpg.dol.govt.nz>
To   "'statalist@hsphsun2.harvard.edu'" <statalist@hsphsun2.harvard.edu>
Subject   st: RE: Stata/Econometric question
Date   Fri, 1 Aug 2003 16:51:33 +1200

Maureen.  xtivreg should give the same results as when you do the model by
hand.  are you including all your exogenous variables (including the
excluded instruments) in the first-stage regression and are you including
the fixed effects in your prediction of the wage?

to demonstrate try:
use auto
xtivreg  price  gear_ratio displacement ( mpg =  weight length), fe
i(foreign)

xtreg  mpg gear_ratio displacement weight length, fe i(foreign)
predict fmpg, xbu
xtreg  price fmpg gear_ratio displacement, fe i(foreign)

The coefficient results from the last command are identical to the xtivreg
results.

Hope this helps,
Steve

> -----Original Message-----
> From:	Maureen Paul [SMTP:M.Paul@warwick.ac.uk]
> Sent:	Thursday, July 31, 2003 12:05 AM
> To:	statalist@hsphsun2.harvard.edu
> Subject:	st: Stata/Econometric question
> 
> Hi all
> 
> I am estimating a labour supply equation with wage as a LHS variable. When
> I use -xtivreg, fe-  the logwage variable becomes insignificant with a
> very high standard error. However, if I perform the IV manually by first
> estimating a fixed effects wage equation and then using the log of the
> predicted wage in the fixed effects hours equation, the estimate is fine. 
> 
> Note that the instrument used passes the tests of validity.
> 
> My questions are 
> 1. Can anyone tell me why I am getting these different results? 
> 
> 2. How much should I be concerned about this given that the wage is not
> really the variable I am interested in?
> 
> Many thanks in advance for any help.
> 
> 
> 
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