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RE: st: Heteroscedasticity and endogeneity in panel


From   "Vincenzo Verardi" <vincenzo_verardi@hotmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   RE: st: Heteroscedasticity and endogeneity in panel
Date   Sat, 07 Feb 2004 08:52:23 -0400

I do not know if it is 100% orthodox, but I would probably act like this:

If you have a model, lets say:

yit=a+bxit+czit+e where xit is endogenous and you would like to instrument it by wit (zit is a set of exogenous variables).

I would first estimate

xit=a2+c2zit+gwit+e2

(where a2 and c2 are just the coefficients associated respectively to the constant and the z variable in this equation and e2 is an error term)

and fit the xit (let's call it xxit).

then I would estimate

yit=a+bxxit+czit+e

with the heteroskeastic structure you want.

Normally this should solve your problem (or at least I hope)

VV

P.S. For the tests, this is fairly standard. Check xttest for heteroskedasticity and maybe a Durbin-Wu-Hausman for endogeneity.






From: "Andrea Molinari" <A.Molinari@sussex.ac.uk>
Reply-To: statalist@hsphsun2.harvard.edu
To: <statalist@hsphsun2.harvard.edu>
Subject: st: Heteroscedasticity and endogeneity in panel
Date: Thu, 5 Feb 2004 13:44:46 -0000

Dear Statalisters,

I am trying to estimate a model in panel data, but which has both
heteroscedastic variances and an endogeneity problem.  I was wondering
whether there would be a suitable model to do this at once.  I also need to
test for both of these.

My dataset is unbalanced, and it has a big N (420 individuals) and a
relatively smaller T (22 years).

I would really appreciate any suggestions!

Thanks,
Andrea Molinari


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