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From |
Stephen Armah <armah.stephen@gmail.com> |

To |
statalist@hsphsun2.harvard.edu |

Subject |
Re: st: STATA command for Testing for endogeneity when the sample size is small. Is there a small sample correction? |

Date |
Sat, 28 Mar 2009 11:31:26 -0500 |

Dear Kit, Thanks for your helpful answer. On 3/28/09, Kit Baum <baum@bc.edu> wrote: > <> > Although the justification for many things with regard to instrumental > variables estimators is only asymptotic, I don't see why the Durbin-Wu- > Hausman test implemented by Baum/Schaffer/Stillman's -ivreg2- option - > endog()- would be problematic in a sample of size 186. That does not > sound particularly small to me, but the ability of the test to > distinguish between OLS and IV may be fairly weak with that amount of > data. > > I have simulated the performance of -endog()- for different sample > sizes, random subsets of the griliches76 dataset used in -help ivreg2- > in which I have added random noise to the variable considered > endogenous. Here is the average p-value for the Durbin-Wu-Hausman > endogeneity test, derived from 1000 replications at each sample size > (en): > > en | mean > ---------+---------- > 50 | .398134 > 100 | .3549545 > 150 | .3360662 > 200 | .3105404 > 250 | .2703655 > 300 | .2614716 > 350 | .2356522 > 400 | .1967296 > 450 | .1733359 > 500 | .1310702 > 550 | .1082535 > 600 | .0737662 > 650 | .0503589 > 700 | .0329359 > 750 | .0164609 > ---------+---------- > > It is apparent that a test that can comfortably reject the null that > OLS is appropriate at a sample size of 600+ has little power to do so > for sample sizes of 150-200. However, I am not aware of any > modification to the test that would enable it to be more powerful in > smaller samples. > > > Kit Baum | Boston College Economics & DIW Berlin | > http://ideas.repec.org/e/pba1.html > An Introduction to Stata Programming > | http://www.stata-press.com/books/isp.html > An Introduction to Modern Econometrics Using Stata | > http://www.stata-press.com/books/imeus.html > > > > On Mar 28, 2009, at 02:33 , Stephen wrote: > >> I am trying to test for endogeneity but I think I the command that I >> am using to test for endogeneity in STATA is not very powerful when >> the sample size is small. >> I have a panel of 31 countries and 6 four-year periods. >> >> >> I am usinging: ivreg2 y x1 x2 (x3 = z1...zn), endog(x3) >> where y is the dependent variable, the xi are the independent >> variables so that x3 is endogenous, x1 and x2 are exogenous and the zi >> are instruments. >> >> Does anyone know of a test of endogeneity in STATA witha small sample >> correction? >> In order words is there a command in STATA that can test for >> endogeneity when the sample size is small? > > * > * For searches and help try: > * http://www.stata.com/help.cgi?search > * http://www.stata.com/support/statalist/faq > * http://www.ats.ucla.edu/stat/stata/ > * * For searches and help try: * http://www.stata.com/help.cgi?search * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

**References**:**Re: st: STATA command for Testing for endogeneity when the sample size is small. Is there a small sample correction?***From:*Kit Baum <baum@bc.edu>

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