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st: instruments in ivreg2


From   Bidisha Mandal <mandal.7@osu.edu>
To   statalist@hsphsun2.harvard.edu
Subject   st: instruments in ivreg2
Date   Tue, 17 Oct 2006 13:12:37 -0400

Hi,

I am working with panel data, and using ivreg2 for estimation purposes.
My dependent variable is a measure of individual's mental health status. One of the independent variables is individual's labor market status, which could be endogenous. Using the 'endog' option I tested that it is in fact endogenous. I used state unemployment rate as a proxy, due to high correlation between this and individual's labor market status. But the J-statistic turns out to be significant. Seems unrealistic, how can my mental health affect state unemployment rate? Is this result because the test JOINTLY tests instruments are uncorrelated with the error AND correctly excluded from the estimated equation? Is there anyway to JUST test whether the instrument is appropriate?

Thanks,

--
Bidisha Mandal

Dept. of AED Economics
The Ohio State University
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