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Re: st: Testing for endogeneity with xtabond
Quoting M Quagliariello <firstname.lastname@example.org>:
> I hope someone can help me.
> Suppose I want to estimate a dynamic panel with xtabond having
> sets of variables:
> A) surely endogenous
> B) surely exogenous
> C) maybe endogenous
> I was thinking to test for the endogenity of variables C) in this
> 1) estimate a model in which variables C are considered as
> The estimated coefficients should be consistent and efficient if
> variables are actually exogenous, but inconsistent if the variables
> are endogenous (model1).
> 2) re-estimate the model considering the variables C) as endogenous
> instrumenting them with their lagged levels (as for the lagged
> variable and the other enedogenous regressors). The estimated
> coefficients should be always consistent (model2).
> 3) test for endogeneity using -hausman model2 model1-
> Is it reasonable?
You don't say so explicitly, but it looks like your category C variables
are regressors. In that case, what you want is a test of a subset of
orthogonality conditions. Because the suspect instruments are regressors,
the usual GMM "difference-in-Sargan" or "C test" for a subset of
orthogonality conditions is numerically equivalent to a Hausman test. See
Hayashi's (2000) textbook, pp. 233-34, or the 2003 Stata Journal paper I
did with Kit Baum and Steve Stillman.
You can proceed as you describe, or, since you're using xtabond2, even
more easily, just calculate the difference of the Sargan-Hansen statistics
of the two estimations. This will be distributed as chi-sq with
dof=number of suspect instruments.
IMPORTANT - you must make sure that every instrument that appears in model
2 is also an instrument in model 1. You want to use lagged C variables as
instruments when estimating model 2, so that means that you have to use
exactly these lagged variables as instruments when estimating model 1 as
well (even though the C variables are being treated as exogenous).
> Thanks a lot,
> * For searches and help try:
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> * http://www.ats.ucla.edu/stat/stata/
Prof. Mark Schaffer
Department of Economics
School of Management & Languages
Heriot-Watt University, Edinburgh EH14 4AS
tel +44-131-451-3494 / fax +44-131-451-3008
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