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re: st: hausman test xtivreg(re) vs ivreg


From   Kit Baum <baum@bc.edu>
To   statalist@hsphsun2.harvard.edu
Subject   re: st: hausman test xtivreg(re) vs ivreg
Date   Fri, 12 Mar 2010 10:18:06 -0500

<>
Sergio said

> I would like to know if it is possible to do a test in Stata on xtivreg
> (with random effects) vs. the same specification using ivreg without
> random effects.
> Please note that this is not a FE vs RE comparison. I can't run FE on my
> specification because my endogenous variable does not vary within xt
> units.
> I have done something like
> 
> ivreg y x2 x3 (x1= z1 z2)
> estimates store ivreg
> xtset w
> xtivreg y x2  x3 (x1= z1 z2), re
> estimates store ivreg_re
> hausman ivreg xtivreg_re, sigmamore

I have not tried this out, but it is surely improper for the hausman command as written. The first estimator named in the hausman
 command is name-consistent, which is supposed to be consistent in all states of the world. The IV estimator applied to panel data is not consistent if there is unobserved heterogeneity;  xtivreg, fe would be consistent in that circumstance. Nor would the IV estimator be efficient in a panel context unless the weight applied in the quasi-differencing to the unit was precisely zero. So the standard IV estimator cannot be either of the estimators listed in the hausman command. 

Why don't you want to contrast xtivreg,fe (which is always consistent under the maintained hypothesis of correct specification) with xtivreg, re (which is relatively efficient if the random component is orthgonal to the regressors)? That is what can be readily done with -hausman- in a panel context.

If your 'endogenous variable does not vary within xt units', it smells like a fixed effect to me!


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


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