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From |
"Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk> |

To |
<statalist@hsphsun2.harvard.edu> |

Subject |
st: RE: Do 2sls, ivreg etc. test the rank condition of identification? |

Date |
Tue, 2 Oct 2007 09:40:09 +0100 |

Thomas, > -----Original Message----- > From: owner-statalist@hsphsun2.harvard.edu > [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of > Thomas Cornelissen > Sent: Tuesday, October 02, 2007 8:55 AM > To: statalist@hsphsun2.harvard.edu > Subject: st: Do 2sls, ivreg etc. test the rank condition of > identification? > > I am wondering how Stata would react if I trid to estimate an > unidentified equation of a simultaneous equations model. > > I tried it out, and got "Equation is not identified -- does > not meet order conditions". > > Do -2sls-, -3sls- and -ivreg- also test the rank condition? > (In case the order condition is met, but not the rank > condition.) In any case, I imagine I wouldn't get any > estimation results if the model is not identified. So, at > least implicitly the rank condition must be checked. The rank condition is not deterministic, like the order condition. It's formulated in terms of expectations - E(Z'X) has full rank - and whereas the number of columns is observable (order condition), the true value of this expectation is not. Instead, you formulate a null hypothesis and see if the data reject at some p value. The null is that the sample counterpart to the expectation - 1/n Z'X - is rank-deficient (has rank=#columns minus 1), and if you can reject the null, you conclude the rank condition is satisfied with some probability p. The rank condition is not automatically checked by -ivreg- (Stata 9.2 and earlier). -estat firststage- after -ivregress- (Stata 10) will report identification statistics, but these are valid only for the i.i.d. case and not if you are using some sort of robust vcv. -ivreg2- reports identification tests based on Anderson's canonical correlation statistic (F form = Cragg-Donald statistic) in the i.i.d. case, and the Kleibergen-Paap rk statistic for robust case. -ivreg2- calls -ranktest- to do this, but you can use -ranktest- to do the test by hand if, e.g., you are doing a 3sls estimation. -help ranktest- is perhaps worth reading - the examples show the equivalence between tests of the rank condition and various regression formulations. Cheers, Mark > Or should a separate command for that be used, such as -ranktest- ? > * > * For searches and help try: > * http://www.stata.com/support/faqs/res/findit.html > * http://www.stata.com/support/statalist/faq > * http://www.ats.ucla.edu/stat/stata/ > * * For searches and help try: * http://www.stata.com/support/faqs/res/findit.html * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

**References**:**st: Do 2sls, ivreg etc. test the rank condition of identification?***From:*Thomas Cornelissen <cornelissen@ewifo.uni-hannover.de>

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