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From |
Jaime Gómez <jaime.gomez@unizar.es> |

To |
<statalist@hsphsun2.harvard.edu> |

Subject |
st: Instrumental variables and panel data |

Date |
Wed, 7 Oct 2009 00:12:43 +0200 |

Dear Statalisters We have a model in which firm performance depends on (1) the order of entry and (2) a possibly endogenous variable and (3) other variables, including time dummies. First, we were suggested to use instrumental variable techniques and to provide HAC standard errors, something we have already done with the ivreg2 command in Stata and using an external instrument. We tested for the exogeneity of the possibly endogenous variable through the endog( ) option and the test shows that the variable could be considered exogenous. In a second step, we have been suggested to use the panel structure of our data and, simultaneously, to consider the endogeneity problem. Ideally, we would like (1) to estimate a panel data model with instrumental variables and HAC errors, (2) to test for the exogeneity of our possible endogenous variable and (3) to check whether the fixed or random effects model is appropriate. So, it seems that the xtivreg or xtivreg2 commands could be the solution. Nevertheless, we have several problems: 1) the order of entry is represented through time invariant dummies (pioneer, second mover, third mover, ...) that drop when we estimate a fixed effects model, but we are (very) interested in the values of the coefficients. So it seems that the only way of getting these coefficients is to estimate a random effects model and check whether this is appropriate with a Hausman test (If I reject the random effects model, ¿could I get the order of entry coefficients through another panel data technique?) 2) Before doing so we have to find the way of getting HAC standard errors. I think I would know how to do this with xtivreg2 (I am assuming that the options are similar to the ones in ivreg2), nevertheless it seems that there is no way of estimating a random effects model with xtivreg2. The problem with using xtivreg seems that the estimation and postestimation options are much more restricted than with xtivreg2 (for example, how do I get HAC errors? How do I test for the endogeneity of the regressor? Should I use xtoverid for testing for the appropriateness of the random effects model?). In summary, is there any way for treating all these issues (possibly omitted variables that advise the use of panel data techniques, time invariant variables of interest, HAC standard errors and instrumental variables) at the same time? Alternatively, could you suggest another strategy to tackle all the problems with Stata (perhaps sequentially?)? Thanks a lot Sincerely Jaime Gómez Universidad de Zaragoza * * 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**:**st: RE: Instrumental variables and panel data***From:*"Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk>

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