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

To |
"Steven Archambault" <archstevej@gmail.com> |

Subject |
RE: st: RE: Sargen-Hansen and instruments--RE vs. FE--Robust |

Date |
Fri, 14 Aug 2009 00:08:24 +0100 |

Steve, > -----Original Message----- > From: Steven Archambault [mailto:archstevej@gmail.com] > Sent: 14 August 2009 00:05 > To: Schaffer, Mark E > Cc: statalist@hsphsun2.harvard.edu; austinnichols@gmail.com; > Alfred.Stiglbauer@oenb.at > Subject: Re: st: RE: Sargen-Hansen and instruments--RE vs. FE--Robust > > Thanks, but I think you misunderstood my question. I would > like to analyze the data with robust standard errors. I knew exactly what you wanted. My solution is this: xtivreg dep `varlist1', re xtoverid, robust noi Cheers, Mark > > This works, > > xtivreg2 dep `varlist1', fe robust; > > But this does not, > > xtivreg2 dep `varlist1', re robust; > > I suppose this question is a bit out of the scope of the > original subject, but it is definitely related. > > Thanks! > > -Steve > > > > On Thu, Aug 13, 2009 at 4:57 PM, Schaffer, Mark > E<M.E.Schaffer@hw.ac.uk> wrote: > > Steve, > > > >> -----Original Message----- > >> From: Steven Archambault [mailto:archstevej@gmail.com] > >> Sent: 13 August 2009 23:48 > >> To: statalist@hsphsun2.harvard.edu > >> Cc: austinnichols@gmail.com; Alfred.Stiglbauer@oenb.at; Schaffer, > >> Mark E > >> Subject: Re: st: RE: Sargen-Hansen and instruments--RE vs. > FE--Robust > >> > >> Is there a way to analyze instrumented panel data using random > >> effects and robust standard errors? It seems the current programs > >> don't allows this. > > > > You can used -xtoverid- to do this. To get an overid stat > after -xtivreg- with random effects, -xtoverid- reestimates > everything internally, and if you ask for a robust overid > stat, that means it reestimates internally with robust SEs. > > > > If you add the option -noi- (for "noisily") to -xtoverid- > after your estimation, you can see the results of the > internal reestimation of the random effects model. > > > > The only problem is ... the variable names in the > -xtoverid- output will all be Stata internal macros with > names like __0000001 and so forth. You can tell which is > which by matching the values of the coefficients in the > -xtoverid- output to the values in the output from your > original estimation. A bit of a hassle but it should work. > > > > Hope this helps. > > > > Cheers, > > Mark > > > >> On Wed, Aug 12, 2009 at 10:28 AM, Steven > >> Archambault<archstevej@gmail.com> wrote: > >> > Mark, > >> > > >> > Many thanks for your response, this clears up several > >> questions. Yes, > >> > I meant having a chi sq value that accepts the null that > >> there is no > >> > difference between RE and FE coefficients, implying the > >> efficient RE > >> > model is preferred. > >> > > >> > -Steve > >> > > >> >> On Wed, Aug 12, 2009 at 6:44 AM, Schaffer, Mark E > >> <M.E.Schaffer@hw.ac.uk> wrote: > >> >>> > >> >>> Steve, > >> >>> > >> >>> I'm not sure exactly what you mean in your question. For > >> one thing, > >> >>> rejection of the null means rejection of RE in favour > of FE. But > >> >>> assuming that's just a typo, here's an attempt at a > >> restatement of > >> >>> the question and an answer: > >> >>> > >> >>> 1. The difference between FE and RE can be stated in GMM > >> terms (see > >> >>> Hayashi's "Econometrics" for a good exposition). The FE > >> estimator > >> >>> uses only the orthogonality conditions that say the demeaned > >> >>> regressor X is orthogonal to the idiosyncratic term > e_ij. The RE > >> >>> estimator uses these orthogonality conditions, plus the > >> >>> orthogonality conditions that say that the mean of X for > >> the panel > >> >>> unit is orthogonaly to the panel error term u_j. > >> >>> > >> >>> 2. This is why the FE vs RE test is an overid test. The RE > >> >>> estimator uses more orthogonality conditions, and so the > >> equation is > >> >>> overidentified. In the special case of classical iid > errors, the > >> >>> Hausman test is numerically the same as the Sargan-Hansen test. > >> >>> > >> >>> 3. Your question is, what happens if some of the Xs are > >> endogenous > >> >>> and you have some Zs as instruments? The answer is > that the same > >> >>> GMM framework encompasses this. You remove some of the > >> demeaned Xs > >> >>> from the orthogonality conditions and add some > demeaned Zs to the > >> >>> orthogonality conditions, and if you are using an RE > >> estimator, you > >> >>> also remove the panel unit means of the Xs from the > orthogonality > >> >>> conditions and add some panel unit means of Zs to > them. (This is > >> >>> the case for the EC2SLS RE estimator - it's a bit > >> different for the > >> >>> G2SLS estimator. The reason is that the G2SLS using a single > >> >>> quasi-demeaned instrument Z instead of the demeaned Z and > >> panel unit > >> >>> mean Z separately, which is what EC2SLS does. I think > >> the intuition > >> >>> for EC2SLS is easier to get.) > >> >>> > >> >>> 4. If the FE model is overidentified, you'll now have > an overid > >> >>> test stat for it that tests the validity of the demeaned > >> Zs as instruments. > >> >>> If you're estimating an RE model, the overid test will > test the > >> >>> validity of the demeaned and panel unit means of the Zs > >> and also the > >> >>> panel unit means of the exogenous Xs. > >> >>> > >> >>> 5. If the overid test with endogenous regressors > rejects the RE > >> >>> model, you have a standard GMM problem: which of your > >> orthogonality > >> >>> conditions is invalid? It could be the demeaned Zs, > or the panel > >> >>> unit means of the Xs, or both, or whatever. In that > >> case, you can > >> >>> do a "GMM distance test" (aka "C test", > >> "Difference-in-Sargan test", > >> >>> etc.) where you compare the Sargan-Hansen test stat (from > >> >>> -xtoverid-) after estimation with and without the orthognality > >> >>> conditions that you think are the likely culprits. But > >> you have to > >> >>> decide ex ante which are the dubious ones - econometric > >> theory can't tell you. > >> >>> > >> >>> Hope this helps. > >> >>> > >> >>> Yours, > >> >>> Mark > >> >>> > >> >>> Prof. Mark Schaffer FRSE > >> >>> Director, CERT > >> >>> Department of Economics > >> >>> School of Management & Languages > >> >>> Heriot-Watt University, Edinburgh EH14 4AS tel > +44-131-451-3494 / > >> >>> fax +44-131-451-3296 http://ideas.repec.org/e/psc51.html > >> >>> > >> >>> > >> >>> > >> >>> > >> >>> > >> >>> ________________________________ > >> >>> > >> >>> From: Steven Archambault [mailto:archstevej@gmail.com] > >> >>> Sent: 12 August 2009 08:50 > >> >>> To: statalist@hsphsun2.harvard.edu; Schaffer, Mark E > >> >>> Cc: austinnichols@gmail.com; Alfred.Stiglbauer@oenb.at > >> >>> Subject: Sargen-Hansen and instruments--RE vs. FE > >> >>> > >> >>> > >> >>> A while back we discussed the use of the > >> Sargen-Hansen test > >> >>> to check if RE was an appropriate analysis to use for > >> panel data. My > >> >>> question now is regarding suspected endogeneity > problems. If the > >> >>> Sargen-Hansen statistic is such that you reject the null, > >> in favor > >> >>> of using the RE, does it follow that we do not need to > >> worry about > >> >>> explanatory variables being endogenous? My feeling is > >> yes, here is > >> >>> the logic. If I were to use xtivreg I would call the same over > >> >>> identification test to see if my instruments are valid. > >> So, if the > >> >>> test already rejects before adding instruments, I > should not need > >> >>> the instruments. > >> >>> > >> >>> If I do use instruments, what is then a valid test to > >> >>> determine if RE is an appropriate model to use (over FE)? > >> >>> > >> >>> Is my question clear? > >> >>> > >> >>> Thanks, > >> >>> Steve > >> >>> > >> >>> > >> >>> > >> >>> On Sat, Jun 27, 2009 at 11:31 AM, Schaffer, Mark E > >> >>> <M.E.Schaffer@hw.ac.uk> wrote: > >> >>> > >> >>> > >> >>> Steve, > >> >>> > >> >>> > -----Original Message----- > >> >>> > From: owner-statalist@hsphsun2.harvard.edu > >> >>> > > [mailto:owner-statalist@hsphsun2.harvard.edu] On > >> >>> Behalf Of > >> >>> > Steven Archambault > >> >>> > Sent: 27 June 2009 00:26 > >> >>> > To: statalist@hsphsun2.harvard.edu; > >> >>> austinnichols@gmail.com; > >> >>> > Alfred.Stiglbauer@oenb.at > >> >>> > Subject: st: Hausman test for clustered > >> random vs. > >> >>> fixed > >> >>> > effects (again) > >> >>> > > >> >>> > Hi all, > >> >>> > > >> >>> > I know this has been discussed before, > >> but in STATA > >> >>> 10 (and > >> >>> > versions before 9 I understand) the canned > >> >>> procedure for > >> >>> > Hausman test when comparing FE and RE > >> models cannot > >> >>> be run > >> >>> > when the data analysis uses > clustering (and by > >> >>> default > >> >>> > corrects for robust errors in STATA 10). > >> >>> > This is the error received > >> >>> > > >> >>> > "hausman cannot be used with vce(robust), > >> >>> vce(cluster cvar), > >> >>> > or p-weighted data" > >> >>> > > >> >>> > My question is whether or not the > >> approach of using > >> >>> xtoverid > >> >>> > to compare FE and RE models (analyzed > using the > >> >>> clustered and > >> >>> > by default robust approach in STATA 10) > >> is accepted > >> >>> in the > >> >>> > literature. This approach produces the > >> >>> Sargan-Hansen stat, > >> >>> > which is typically used with analyses > that have > >> >>> > instrumentalized variables and need an > >> >>> overidentification > >> >>> > test. For the sake of publishing I am > >> wondering if > >> >>> it is > >> >>> > better just not to worry about > >> heteroskedaticity, > >> >>> and avoid > >> >>> > clustering in the first place (even though > >> >>> heteroskedaticity > >> >>> > likely exists)? Or, alternatively one > could just > >> >>> calculate > >> >>> > the Hausman test by hand following > the clustered > >> >>> analyses. > >> >>> > > >> >>> > Thanks for your insight. > >> >>> > >> >>> It's very much accepted in the > literature. In the > >> >>> -xtoverid- help file, > >> >>> see especially the paper by Arellano and > >> the book by > >> >>> Hayashi. > >> >>> > >> >>> If you suspect heteroskedasticity or clustered > >> >>> errors, there really is > >> >>> no good reason to go with a test > (classic Hausman) > >> >>> that is invalid in > >> >>> the presence of these problems. The GMM > >> -xtoverid- > >> >>> approach is a > >> >>> generalization of the Hausman test, in the > >> following > >> >>> sense: > >> >>> > >> >>> - The Hausman and GMM tests of fixed vs. random > >> >>> effects have the same > >> >>> degrees of freedom. This means the result > >> cited by > >> >>> Hayashi (and due to > >> >>> Newey, if I recall) kicks in, namely... > >> >>> > >> >>> - Under the assumption of homoskedasticity and > >> >>> independent errors, the > >> >>> Hausman and GMM test statistics are numerically > >> >>> identical. Same test. > >> >>> > >> >>> - When you loosen the iid assumption and allow > >> >>> heteroskedasticity or > >> >>> dependent data, the robust GMM test is > the natural > >> >>> generalization. > >> >>> > >> >>> Hope this helps. > >> >>> > >> >>> Cheers, > >> >>> Mark (author of -xtoverid-) > >> >>> > >> >>> > * > >> >>> > * 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/ > >> >>> > > >> >>> > >> >>> > >> >>> -- > >> >>> Heriot-Watt University is a Scottish charity > >> >>> registered under charity number SC000278. > >> >>> > >> >>> > >> >>> * > >> >>> * 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/ > >> >>> > >> >>> > >> >>> > >> >>> > >> >>> > >> >>> -- > >> >>> Heriot-Watt University is a Scottish charity registered under > >> >>> charity number SC000278. > >> >>> > >> >>> > >> >>> * > >> >>> * 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/ > >> >> > >> > > >> > > > > > > -- > > Heriot-Watt University is a Scottish charity registered > under charity > > number SC000278. > > > > > -- Heriot-Watt University is a Scottish charity registered under charity number SC000278. * * 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/

**Follow-Ups**:**Re: st: RE: Sargen-Hansen and instruments--RE vs. FE--Robust***From:*Steven Archambault <archstevej@gmail.com>

**References**:**Re: st: RE: Sargen-Hansen and instruments--RE vs. FE--Robust***From:*Steven Archambault <archstevej@gmail.com>

**RE: st: RE: Sargen-Hansen and instruments--RE vs. FE--Robust***From:*"Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk>

**Re: st: RE: Sargen-Hansen and instruments--RE vs. FE--Robust***From:*Steven Archambault <archstevej@gmail.com>

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