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st: xtabond2 and Sargan test


From   Olga Gorbachev <ogorbach@staffmail.ed.ac.uk>
To   statalist@hsphsun2.harvard.edu
Subject   st: xtabond2 and Sargan test
Date   Mon, 05 Oct 2009 14:59:51 +0100

Dear Listservers,


I am running xtabond2 option.
I get that Sargan test of overid. restrictions:
chi2(188)  = 250.54  Prob > chi2 =  0.002

Hansen test of overid. restrictions:
chi2(188)  = 175.52  Prob > chi2 =  0.734

Does this mean that I should reduce the number of instruments?
Additionally, I have AR(2) in first differences and thus am using gmm(l.Z, lag(3 .)) to specify the instruments to be used.

Could you please clarify whether the Hansen/Sargan tests are valid under this specification?

Thank you in advance,
Olga

Here is the syntax of the command I ran and the output:

***
xtabond2 df age age2 ed12 nwe12 perd2 perd3 perd4 lnrtb3 dna dnk dms dhrsw dhrsh dyu2, gmm(L.(lnrtb3 dms dna dnk dfu dyu2 dhrsh dhrsw), lag(3) collapse) iv(age age2 edCol edColp ednoHS) twostep robust noconstant small orthogonal art(3)

Warning: Two-step estimated covariance matrix of moments is singular.
Using a generalized inverse to calculate optimal weighting matrix for two-step estimation.
  Difference-in-Sargan/Hansen statistics may be negative.

Dynamic panel-data estimation, two-step system GMM
------------------------------------------------------------------------------
Group variable: pid                Number of obs      =     31428
Time variable : year               Number of groups   =      6715
Number of instruments = 202        Obs per group: min =         1
F(14, 6715)   =     12.30                         avg =      4.68
Prob > F      =     0.000                         max =        23
------------------------------------------------------------------------------
             |              Corrected
df | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
 age |   .0101859   .0072103     1.41   0.158    -.0039485    .0243203
age2 |  -.0001286   .0000823    -1.56   0.118    -.0002899    .0000327
ed12 |  -.0650101   .0351083    -1.85   0.064    -.1338335    .0038133
nwe12 |   .1055316   .0653455     1.61   0.106    -.0225664    .2336296
perd2 |  -.0762958   .1382154    -0.55   0.581    -.3472419    .1946503
perd3 |   .0147213   .1381243     0.11   0.915    -.2560462    .2854888
 perd4 |  -.1659716    .155361    -1.07   0.285    -.4705284    .1385852
lnrtb3 |   .8725896   .3702258     2.36   0.018     .1468295     1.59835
 dna |  -.0122323   .0858887    -0.14   0.887    -.1806013    .1561368
dnk |   .0865718   .0948575     0.91   0.361     -.099379    .2725226
 dms |  -.0699546   .0793642    -0.88   0.378    -.2255337    .0856244
 dhrsw |   .0391827   .0248344     1.58   0.115    -.0095006     .087866
 dhrsh |   .0287372   .0310284     0.93   0.354    -.0320883    .0895626
 dyu2 |  -.2672077   .1173428    -2.28   0.023    -.4972369   -.0371786
------------------------------------------------------------------------------
Instruments for orthogonal deviations equation
  Standard
    FOD.(age age2 edCol edColp ednoHS)
GMM-type (missing=0, separate instruments for each period unless collapsed) L(3/.).(L.lnrtb3 L.dms L.dna L.dnk L.dfu L.dyu2 L.dhrsh L.dhrsw) collapsed
Instruments for levels equation
  Standard
    age age2 edCol edColp ednoHS
GMM-type (missing=0, separate instruments for each period unless collapsed)
    DL2.(L.lnrtb3 L.dms L.dna L.dnk L.dfu L.dyu2 L.dhrsh L.dhrsw) collapsed
------------------------------------------------------------------------------
Arellano-Bond test for AR(1) in first differences:
z = -25.63  Pr > z =  0.000
Arellano-Bond test for AR(2) in first differences:
z =   8.11  Pr > z =  0.000
Arellano-Bond test for AR(3) in first differences:
z =   0.10  Pr > z =  0.919
------------------------------------------------------------------------------
Sargan test of overid. restrictions:
chi2(188)  = 250.54  Prob > chi2 =  0.002
  (Not robust, but not weakened by many instruments.)
Hansen test of overid. restrictions:
chi2(188)  = 175.52  Prob > chi2 =  0.734
  (Robust, but can be weakened by many instruments.)

Difference-in-Hansen tests of exogeneity of instrument subsets:
  GMM instruments for levels
    Hansen test excluding group:
chi2(180)  = 169.29  Prob > chi2 =  0.706
    Difference (null H = exogenous):
chi2(8)    =   6.23  Prob > chi2 =  0.622
  iv(age age2 edCol edColp ednoHS)
    Hansen test excluding group:
chi2(183)  = 164.35  Prob > chi2 =  0.835
    Difference (null H = exogenous):
chi2(5)    =  11.17  Prob > chi2 =  0.048


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begin:vcard
fn:Olga  Gorbachev
n:Gorbachev;Olga 
org:University of Edinburgh;Economics
adr:;;31 Buccleuch Place, 3.06;Edinburgh;;EH8 9JT;UK
email;internet:Olga.Gorbachev@ed.ac.uk
tel;work:44 (0) 131 651 3853
url:http://homepages.ed.ac.uk/ogorbach/
version:2.1
end:vcard




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