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From |
Mario F Rueda Narváez <mfrueda@uma.es> |

To |
statalist@hsphsun2.harvard.edu |

Subject |
Re: st: xthtaylor |

Date |
Mon, 09 Feb 2004 09:58:22 +0100 |

The online help for -xthtaylor- states that the endog() option is required,Can I use XTHTAYLOR assuming no variables are correlated with a(i)? In other words, is the endog(varlist_endog) option required? I don't yet have Stata 8 so I can't just try this.

http://www.stata.com/help.cgi?xthtaylor

However, the Hausman-Taylor estimator of a model where every variable in X and Z is assumed to be uncorrelated with the random effect [a(i), or u(i) in stata's notation] is simply a random-effects model (-xtreg, re- y on X and Z varlists). I don't have the paper here, but I think this is stated in Hausman and Taylor (1981) econometrica paper.

Don't trust me much in this, but I think that depending on the procedures used in steps (1) and (2) (and possibly on the (un)balanced nature of your panel data set) you could get a "ghat" estimator that would be consistent but not efficient. If all variables in X and Z are really exogenous, -xtreg, fe- is both consistent and efficient.If not, does anyone have a reaction to this proposed method: 1. estimate y(it)=b*x(it) + a(i) + e(it) 2. regress ahat(i) on z(i) to estimate ghat, using bootstrap to get standard errors right

Hope this helps,

Mario F. Rueda Narváez

Departamento de Estadística y Econometría

Facultad de Ciencias Económicas

Universidad de Málaga

El Ejido s/n

29013 Málaga (España)

<http://www.estyeco.uma.es/>http://www.estyeco.uma.es/

Tlf: +34 952 13 71 90

Fax: +34 952 13 72 62

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**References**:**st: xthtaylor***From:*ACavallo@lexecon.com

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