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Re: st: ivreg2: No validity tests if just-identified?


From   Kit Baum <baum@bc.edu>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: ivreg2: No validity tests if just-identified?
Date   Thu, 16 Apr 2009 06:59:18 -0400

<>
Not so. That is the purpose of the Durbin-Wu-Hausman test contrasting OLS and IV estimates of the same equation. The null of that test is that the moment condition is satisfied; a rejection indicates that OLS will not be consistent and IV should be used. See Baum-Schaffer- Stillman, Stata Journal 7:4, 2007, available in preprint form from my website below.


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 Apr 16, 2009, at 02:33 , Michael wrote:

To your concern about "economic persuasion": one would use
instrumental variables if OLS is expected to yield biased results --
that is, if E[X'u] ~= 0.  Of course, this moment condition is not
testable:  you must use economic theory and/or intuition
("persuasion") to argue for the need for an IV estimator in the first
place.

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