Statalist


[Date Prev][Date Next][Thread Prev][Thread Next][Date index][Thread index]

Re: st: Re: other ways in dealing with endogeneity other than IV?


From   "[email protected]" <[email protected]>
To   "[email protected]" <[email protected]>
Subject   Re: st: Re: other ways in dealing with endogeneity other than IV?
Date   Mon, 12 May 2008 07:42:54 -0700

Belated thanks to both Kit and Austin for correcting/clarifying my post and sorry to all Statalist members if was obscure or if it was/sounded at least partially wrong.
Nicola
At 02.33 08/05/2008 -0400, you wrote:
>In Austin's excellent Stata Journal (7:4, 2007) article, he discusses
>the usefulness of fixed effects models to deal with a certain kind of
>'endogeneity', which he describes as correlation between regressor
>and error. It is true that in the model
>
>y_it = X_it b + u_it
>
>on panel data, with X strictly exogenous, there will be an
>endogeneity problem if there is unobserved heterogeneity that depends
>only on who you are (only on i). This arises because the true DGP is
>
>y_it = X_it b + [ a_i + u_it]
>
>and if a_i (individual-specific characteristics) are correlated with
>observed X's, the error term is correlated with the regressors and
>OLS is inconsistent. That can be dealt with, as he discusses, with
>fixed effects, expressing a_i as a parameter to be estimated using
>individual-specific dummy variables or the within transformation, a
>la -xtreg, fe- or -areg-.
>
>BUT if the original assumption that X is exogenous -- uncorrelated
>with u -- is not appropriate, then there is conventional endogeneity
>in the equation as well as unobserved heterogeneity. Fixed effects
>will deal with the latter, but not the former, and fixed effects will
>be just as inconsistent as pooled OLS. That is the point I was
>making. In that circumstance you need an IV fixed-effects estimator
>such as that implemented by -xtivreg, fe- or -xtivreg2, fe-, or an
>estimator implementing the first difference transformation with IV (-
>xtivreg, fd- or -xtivreg2, fd-).
>
>
>Kit Baum, Boston College Economics and DIW Berlin
>http://ideas.repec.org/e/pba1.html
>An Introduction to Modern Econometrics Using Stata:
>http://www.stata-press.com/books/imeus.html
>
>
>On May 7, 2008, at 02:33 , Austin wrote:
>> Kit et al.--
>> A fixed-effects model deals with one very specific type of endogeneity
>> due to omitted variables that vary only across groups in i() and not
>> within.  Hence the discussion of -xtreg- in
>> http://www.stata-journal.com/article.html?article=st0136

*
*   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/

Privileged, confidential or patient identifiable information may be contained in this message. This information is meant only for the use of the intended recipients. If you are not the intended recipient, or if the message has been addressed to you in error, do not read, disclose, reproduce, distribute, disseminate or otherwise use this transmission. Instead, please notify the sender by reply e-mail, and then destroy all copies of the message and any attachments.

*
*   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/



© Copyright 1996–2024 StataCorp LLC   |   Terms of use   |   Privacy   |   Contact us   |   What's new   |   Site index