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st: re: how to implement this test?


From   Kit Baum <kitbaum@mac.com>
To   statalist@hsphsun2.harvard.edu
Subject   st: re: how to implement this test?
Date   Sun, 30 Nov 2008 16:08:28 -0500

< >
Carola said

I need to run a test to find out how sensitive my estimates are to violations of the exclusion restriction of the instrumental variable I am using. Could anyone let me know what the code is in STATA10?


If you mean testing whether it is valid to treat a particular variable as excluded from the equation (serving as an excluded instrument), merely change its status to included. Under the null hypothesis that it does not have a direct impact on the dependent variable, its coefficient should not be distinguishable from zero. Inclusion of irrelevant explanatory variables does not bias the point estimates of other variables, so if the variable plays no direct role in the equation, your estimates will not be sensitive to its use as an included exogenous variable. On the other hand, if it is significant when included, it causes bias and inconsistency to exclude it...

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


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