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Re: st: RE: Blown up IV coefficient
From
Shikha Sinha <[email protected]>
To
[email protected]
Subject
Re: st: RE: Blown up IV coefficient
Date
Wed, 9 Mar 2011 13:52:47 -0500
Now, I am running the model without the fixed effect. First stage
looks good, rank is significant and has the expected sign. OLS
coefficient is (-1.868918), while IV coeff is still blown up
(-19.42056), in spite of a strong IV. What could be the reason for
this? Also, sometimes, sign changes in IV estimation, whats the
economteric argument for the sign change?
Thanks,
Shikha
reg roaddum rank ims_hab_pop, robust
Linear regression Number of obs = 266
F( 2, 263) = 17.60
Prob > F = 0.0000
R-squared = 0.0705
Root MSE = .48247
------------------------------------------------------------------------------
| Robust
roaddum | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
rank | .0055897 .0009531 5.86 0.000 .0037131 .0074663
ims_hab_pop | -.0001736 .0005512 -0.31 0.753 -.001259 .0009117
_cons | .4812974 .5810408 0.83 0.408 -.6627865 1.625381
------------------------------------------------------------------------------
. reg avgdalprice roaddum ims_hab_pop, robust
Linear regression Number of obs = 251
F( 2, 248) = 1.02
Prob > F = 0.3609
R-squared = 0.0085
Root MSE = 12.093
------------------------------------------------------------------------------
| Robust
avgdalprice | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
roaddum | -1.868918 1.55255 -1.20 0.230 -4.926783 1.188947
ims_hab_pop | .0117034 .0144311 0.81 0.418 -.0167197 .0401265
_cons | 116.8683 15.27632 7.65 0.000 86.78041 146.9561
------------------------------------------------------------------------------
. ivreg2 avgdalprice ims_hab_pop (roaddum=rank), robust
IV (2SLS) estimation
--------------------
Estimates efficient for homoskedasticity only
Statistics robust to heteroskedasticity
Number of obs = 251
F( 2, 248) = 4.33
Prob > F = 0.0142
Total (centered) SS = 36580.18327 Centered R2 = -0.5124
Total (uncentered) SS = 4167930 Uncentered R2 = 0.9867
Residual SS = 55324.45189 Root MSE = 14.85
------------------------------------------------------------------------------
| Robust
avgdalprice | Coef. Std. Err. z P>|z| [95% Conf. Interval]
-------------+----------------------------------------------------------------
roaddum | -19.42056 6.622308 -2.93 0.003 -32.40005 -6.441074
ims_hab_pop | .016525 .0172844 0.96 0.339 -.0173519 .0504019
_cons | 121.521 18.02514 6.74 0.000 86.19241 156.8496
------------------------------------------------------------------------------
Underidentification test (Kleibergen-Paap rk LM statistic): 18.413
Chi-sq(1) P-val = 0.0000
------------------------------------------------------------------------------
Weak identification test (Cragg-Donald Wald F statistic): 17.930
(Kleibergen-Paap rk Wald F statistic): 32.974
Stock-Yogo weak ID test critical values: 10% maximal IV size 16.38
15% maximal IV size 8.96
20% maximal IV size 6.66
25% maximal IV size 5.53
Source: Stock-Yogo (2005). Reproduced by permission.
NB: Critical values are for Cragg-Donald F statistic and i.i.d. errors.
------------------------------------------------------------------------------
Hansen J statistic (overidentification test of all instruments): 0.000
(equation exactly identified)
------------------------------------------------------------------------------
Instrumented: roaddum
Included instruments: ims_hab_pop
Excluded instruments: rank
------------------------------------------------------------------------------
On Wed, Mar 9, 2011 at 1:32 PM, Wooldridge, Jeffrey <[email protected]> wrote:
> No, sorry. You of course had it right. That's what I get for copying and pasting and not editing very well.
>
> I suspected rank would not be statistically significant. Seems hard to justify IV in that case.
>
> -----Original Message-----
> From: [email protected] [mailto:[email protected]] On Behalf Of Shikha Sinha
> Sent: Wednesday, March 09, 2011 1:25 PM
> To: [email protected]
> Subject: Re: st: RE: Blown up IV coefficient
>
> Jeff, thanks.
>
> Should the reduced-form also include the dependent variable
> (agr_share) as mentioned by you?
> areg roaddum rank ims_hab_pop, absorb(dcode) robust
>
> Sign on rank is expected, but it is statistically insignificant...
>
> Thanks,
> Shikha
>
> On Wed, Mar 9, 2011 at 12:24 PM, Wooldridge, Jeffrey <[email protected]> wrote:
>> For the IV estimates to be at all convincing, first run the reduced
>> form,
>>
>> areg roaddum rank agr_share ims_hab_pop, absorb(dcode) robust
>>
>> and look at the sign of the coefficient on rank and its t statistic.
>> Hopefully you have a predicted sign for the effect of rank on roaddum.
>> If the sign is what you expect, is rank strongly statistically
>> significant? The statistics for weak identification provide this
>> information, too, but you should estimate the reduced form, anyway. It
>> is easier to see what is happening.
>>
>> My guess is the instrument is weak. Or, the IV could actually be
>> endogenous (which cannot be tested, unfortunately).
>>
>> Jeff
>>
>> -----Original Message-----
>> From: [email protected]
>> [mailto:[email protected]] On Behalf Of Shikha Sinha
>> Sent: Wednesday, March 09, 2011 12:17 PM
>> To: [email protected]
>> Subject: st: Blown up IV coefficient
>>
>> Dear all,
>>
>> I am estimating an instrumental variable model by using -ivreg2 in
>> Stata. The IV estimates are way more than OLS estimate (4.006567).
>> Could you advise what could be possible reasons for such a blown up IV
>> coeff (49.97424 )? or my interpretation of coeff is incorrect.
>>
>> areg agr_share roaddum ims_hab_pop, robust absorb(dcode)
>>
>> Linear regression, absorbing indicators Number of obs =
>> 266
>> F( 2, 250) =
>> 0.66
>> Prob > F =
>> 0.5182
>> R-squared =
>> 0.0680
>> Adj R-squared =
>> 0.0121
>> Root MSE =
>> 26.294
>>
>> ------------------------------------------------------------------------
>> ------
>> | Robust
>> agr_share | Coef. Std. Err. t P>|t| [95% Conf.
>> Interval]
>> -------------+----------------------------------------------------------
>> ------
>> roaddum | 4.006567 3.572553 1.12 0.263 -3.02957
>> 11.0427
>> ims_hab_pop | .001926 .0344155 0.06 0.955 -.0658552
>> .0697071
>> _cons | 34.78717 36.38659 0.96 0.340 -36.87615
>> 106.4505
>> -------------+----------------------------------------------------------
>> ------
>> dcode | absorbed (14
>> categories)
>>
>> . xi: ivreg2 agr_share ims_hab_pop i.dcode (roaddum=rank), robust
>> i.dcode _Idcode_1-14 (_Idcode_1 for dcode==UP09
>> omitted)
>>
>> IV (2SLS) estimation
>> --------------------
>>
>> Estimates efficient for homoskedasticity only
>> Statistics robust to heteroskedasticity
>>
>> Number of obs =
>> 266
>> F( 15, 250) =
>> 0.88
>> Prob > F =
>> 0.5891
>> Total (centered) SS = 185457.6241 Centered R2 =
>> -0.5185
>> Total (uncentered) SS = 590824 Uncentered R2 =
>> 0.5233
>> Residual SS = 281625.775 Root MSE =
>> 32.54
>>
>> ------------------------------------------------------------------------
>> ------
>> | Robust
>> agr_share | Coef. Std. Err. z P>|z| [95% Conf.
>> Interval]
>> -------------+----------------------------------------------------------
>> ------
>> roaddum | 49.97424 35.09856 1.42 0.154 -18.81768
>> 118.7662
>> ims_hab_pop | -.0354515 .0511597 -0.69 0.488 -.1357226
>> .0648196
>> _Idcode_2 | -39.0505 25.58464 -1.53 0.127 -89.19546
>> 11.09446
>> _Idcode_3 | -41.62481 26.03165 -1.60 0.110 -92.64591
>> 9.396298
>> _Idcode_4 | -16.54727 20.19038 -0.82 0.412 -56.11968
>> 23.02513
>> _Idcode_5 | -41.45807 29.51111 -1.40 0.160 -99.29878
>> 16.38264
>> _Idcode_6 | -32.93124 16.32568 -2.02 0.044 -64.929
>> -.9334909
>> _Idcode_7 | -8.880318 13.20529 -0.67 0.501 -34.76221
>> 17.00157
>> _Idcode_8 | -44.38007 24.23395 -1.83 0.067 -91.87774
>> 3.117595
>> _Idcode_9 | -44.81575 24.87717 -1.80 0.072 -93.57409
>> 3.942605
>> _Idcode_10 | -21.14303 12.84912 -1.65 0.100 -46.32684
>> 4.040777
>> _Idcode_11 | -22.56438 9.922245 -2.27 0.023 -42.01162
>> -3.117138
>> _Idcode_12 | -12.55903 12.52187 -1.00 0.316 -37.10144
>> 11.98338
>> _Idcode_13 | -14.25003 9.233117 -1.54 0.123 -32.34661
>> 3.846547
>> _Idcode_14 | -26.27491 11.42556 -2.30 0.021 -48.66859
>> -3.881229
>> _cons | 74.88709 53.28162 1.41 0.160 -29.54296
>> 179.3171
>> ------------------------------------------------------------------------
>> ------
>> Underidentification test (Kleibergen-Paap rk LM statistic):
>> 1.825
>> Chi-sq(1) P-val =
>> 0.1767
>> ------------------------------------------------------------------------
>> ------
>> Weak identification test (Cragg-Donald Wald F statistic):
>> 2.977
>> (Kleibergen-Paap rk Wald F statistic):
>> 2.488
>> Stock-Yogo weak ID test critical values: 10% maximal IV size
>> 16.38
>> 15% maximal IV size
>> 8.96
>> 20% maximal IV size
>> 6.66
>> 25% maximal IV size
>> 5.53
>> Source: Stock-Yogo (2005). Reproduced by permission.
>> NB: Critical values are for Cragg-Donald F statistic and i.i.d. errors.
>> ------------------------------------------------------------------------
>> ------
>> Hansen J statistic (overidentification test of all instruments):
>> 0.000
>> (equation exactly
>> identified)
>> ------------------------------------------------------------------------
>> ------
>> Instrumented: roaddum
>> Included instruments: ims_hab_pop _Idcode_2 _Idcode_3 _Idcode_4
>> _Idcode_5
>> _Idcode_6 _Idcode_7 _Idcode_8 _Idcode_9 _Idcode_10
>> _Idcode_11 _Idcode_12 _Idcode_13 _Idcode_14
>> Excluded instruments: rank
>> ------------------------------------------------------------------------
>> ------
>>
>> Thanks,
>> Shikha
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