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st: RE: ivreg2 test of exogeneity


From   "Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk>
To   <statalist@hsphsun2.harvard.edu>
Subject   st: RE: ivreg2 test of exogeneity
Date   Fri, 21 Apr 2006 12:53:26 +0100

Max, 

> -----Original Message-----
> From: owner-statalist@hsphsun2.harvard.edu 
> [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of 
> kosak@gmx.de
> Sent: 21 April 2006 10:51
> To: statalist@hsphsun2.harvard.edu
> Subject: st: ivreg2 test of exogeneity
> 
> Dear Statalist members,
> i have a question concerning the command ivreg2.
> I am estimating a rudimental fixed effect model,
> where the 
> dependent variable is wage, and the independent v. of 
> interest unemployment rate.the observation units are groups 
> of individuals differentiated by skills. i want to control 
> for unobserved heterogeneity of the groups.some of my 
> covariates are constant, and so they get treated as part of 
> the error term.i want to test the strict exogeneity 
> assumption on the explanatory variables that underlies the 
> fe/re model by using ivreg2.in particualr i guess that 
> education, which is constant over time and hence part of the 
> individual component of the error term,correlates with the 
> unemployment rate.
> 
> i used the lag value of unemployment rate as an instrument, 
> and pooled the data.
> is the following command correct?
> 
> ivreg2  wage  d_educ2-d_educ4  exp /*
> */  unemploym ( = unemploym-1) [aweight=weight],orthog(unemploym)

That's right, but the latest version of ivreg2 (2.1.15) has a new
option, "endog", which lets you do the same test but in a slightly more
intuitively understandable way:

ivreg2  wage  d_educ2-d_educ4 exp /*
*/  (unemploym = unemploym-1) [aweight=weight], endog(unemploym)

You will get the same test statistic as your proposed command, but this
is a little clearer: you are asking whether unemploym needs to be
specified as endogenous.

--Mark

> Thanks for your suggestions,
> Max
> 
> 
> 
> 
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