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

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

Subject |
st: RE: re: question on XTOVERID |

Date |
Mon, 22 Mar 2010 15:17:10 -0000 |

Apostolos, A quick addendum to what Kit has said: if I'm not mistaken, Baltagi's textbook on panel data econometrics has a short exposition of the Hausman-Taylor model and includes a description of what the test of overidentifying restrictions after a H-T estimation actually tests. Best wishes, Mark > -----Original Message----- > From: owner-statalist@hsphsun2.harvard.edu > [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of Kit Baum > Sent: Monday, March 22, 2010 2:05 PM > To: statalist@hsphsun2.harvard.edu > Subject: st: re: question on XTOVERID > > <> > > I am interesting in performing a Hausman-Taylor estimation > in stata (using > > -xthtaylor command).However, as an attempt to test the > assumptions required > > to get consistent estimators (that the most, except from > the endogenous > > regressors, are not correlated with the time-invariant > error term), I did > > following: > > xtahylor y x z e f x, endog(z) /// note f, x and z time invariant > > variables > > estimates store xt > > xtreg y x e, fe > > estimates store fe > > hausman fe xt > > In other words, I test the differences between the > co-efficients from the > > two models. If the H0 of no systematic difference was not > rejected, the > > instrumentation of the z variable is sufficient to remove > any correlation > > between the time-ivariant error term and the remaining regressors. > > I am wondering what the -XTOVERID, after the -xtahylor > command, could > > exactly does? Reading the stata help file, I did not find > any specific > > reference for the case using the command after the xtahylor > (except from > > the calculation of the dof). > > There are two different sets of assumptions here. If you look > at the example in -help xthtaylor-, and rerun that model > as a FE model, the -hausman- test will not reject its null > there either. But that hausman test is run under the > maintained hypothesis that the FE model is consistent. If it > was consistent, why would you be using an instrumental > variables approach such as H-T? > The hausman test has no power if the maintained hypothesis > (that the first model is consistent under H0 and Ha) is violated. > > If you run the example in -help hausman- and then do > -xtoverid-, you get a strong rejection of the null that the > overidentifying > restrictions are satisfied. In the case of H-T, the > assumption is that some of the variables are correlated with the > individual effect (rendering RE inconsistent) but that this > can be dealt with using H-T. The second assumption is that ALL of the > variables are suitably independent of the idiosyncratic error > term. This is being tested by -xtoverid-, and the rejection > in this case > means, I believe, that the assumptions required for validity > of the H-T estimates are violated. That could be true for many > reasons, as in the usual IV case; e.g. omitted variables or > wrong functional form. If you apply -xtoverid- after a RE > model, for which the assumption is that X is indep of the > individual component, a rejection means that RE assumptions > do not hold. > I believe the inference here w.r.t. H-T is the same. > > 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 > > > * > * 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/

**Follow-Ups**:**st: AW: RE: re: question on XTOVERID***From:*"Martin Weiss" <martin.weiss1@gmx.de>

**References**:**st: re: question on XTOVERID***From:*Kit Baum <baum@bc.edu>

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