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st: RE: using xtivreg2 with no endogenity problem


From   "Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk>
To   <statalist@hsphsun2.harvard.edu>
Subject   st: RE: using xtivreg2 with no endogenity problem
Date   Tue, 26 Sep 2006 00:30:01 +0100

Woong Chung,

> -----Original Message-----
> From: owner-statalist@hsphsun2.harvard.edu 
> [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of 
> Woong.Chung@colorado.edu
> Sent: 26 September 2006 00:12
> To: statalist@hsphsun2.harvard.edu
> Subject: st: using xtivreg2 with no endogenity problem
> 
> Hello.
> I just wonder if I can still use xtivreg2 even if there is no 
> endogenity problem.
> For instance, I run
> 
> "xtivreg2 y x1 x2 x3 x4 x5 t1-t5 (d=l1.d l2.d),ffirst fe 
> ivar(i) gmm endog(d) robust cluster(i)"
> 
> and figured out that it failed to reject the endog 
> testing(then it says that d has not endogenity issue),then my 
> question is that I can still use xtivreg2 in order to dealing 
> with heteroskadasticity(robust) and error-correlated issue
> (cluster) such as:
> " xtivreg2 y x1 x2 x3 x4 x5 t1-t5 d,fe ivar(i) robust cluster(i)"

Indeed you can.  Incidentally, if you wanted to do efficient GMM, you
could even do

xtivreg2 y x1 x2 x3 x4 x5 t1-t5 d (=l1.d l2.d),ffirst fe 
ivar(i) gmm endog(d) robust cluster(i)

This is different from your specification

xtivreg2 y x1 x2 x3 x4 x5 t1-t5 d,fe ivar(i) robust cluster(i)

in that you use the extra orthogonality conditions you were previously
using for instrumenting d, but here you use them to get efficient
estimates.  This isn't usually done, because it can easily get out of
hand - when do you stop adding orthogonality conditions? see the
Wooldrige article in the J. Econ. Perspectives from several years ago -
but here you might want to do it because it will give you test
statistics that more direclty comparable to those in your original
specification with d endogneous.  Just a thought.

Cheers,
Mark

Prof. Mark Schaffer
Director, CERT
Department of Economics
School of Management & Languages
Heriot-Watt University, Edinburgh EH14 4AS
tel +44-131-451-3494 / fax +44-131-451-3296
email: m.e.schaffer@hw.ac.uk
web: http://www.sml.hw.ac.uk/ecomes


> 
> Appreciate of commentings if there are any other suggestions 
> that deal with this issue
> 
> 
> 
> 
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