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Re: st: endogeneity and IV


From   Mark Schaffer <M.E.Schaffer@hw.ac.uk>
To   Katarina Lynch <ferkel999@hotmail.com>
Subject   Re: st: endogeneity and IV
Date   Fri, 29 Oct 2004 14:28:51 +0100 (BST)

Katarina,

Quoting Katarina Lynch <ferkel999@hotmail.com>:

> Thank you, Mark!
> 
> >
> >The Sargan(-Hansen) stat at the bottom of the xtabond output is a
> test of
> >your orthogonality conditions, i.e., that your exogenous
> independent
> >variables and instruments are indeed exogenous.
> >
> 
> Before using xtabond command how can I determine which variables
> should be 
> lagged as instruments? Should I run xthausman command for each
> regressor? Or 
> is it totally up to my intuition?

"Priors" is probably a better choice than "intuition" when you write up 
your results.  -xthausman- won't help because in that framework, fixed 
effects is consistent, and if that were so, you wouldn't need -xtabond- or 
its sibling -xtabond2-.

> One more question, does xtabond command take first differences 
> automatically, or should I do it by myself?

It's automatic.  And before you go further, you might want to have a look 
at David Roodman's -xtabond2-.

--Mark

> 
> Thanks in advance!
> 
> Katarina
> 
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Prof. Mark Schaffer
Director, CERT
Department of Economics
School of Management & Languages
Heriot-Watt University, Edinburgh EH14 4AS
tel +44-131-451-3494 / fax +44-131-451-3008
email: m.e.schaffer@hw.ac.uk
web: http://www.sml.hw.ac.uk/ecomes
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