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st: SUEST vs IV


From   John Antonakis <John.Antonakis@unil.ch>
To   statalist@hsphsun2.harvard.edu
Subject   st: SUEST vs IV
Date   Thu, 07 Apr 2011 17:40:32 +0200

Hi:

I am examining the effect of an endocrinological variable (X) as a predictor in a regression model; X correlates very strongly with being male.

Suppose the basic model is:

y = a0 + a1X + control variables + u

One way to account for the difference in X for males and females is to include the dummy variable male in the regression:

y = b0 + b1X + b2Male + control variables + e

I could also interact Male with X and all the predictor variables to remove any heterogeneity in the model due to being Male. Or a simpler way to do this is with seemingly unrelated estimation (suest). That is, I estimate the model separately for women and men and then stack the models with suest. In this way, I can clearly see the effect of X on y in both groups and do cross-equation tests as needed.

However, to see the general effect of X on y, while accounting for what causes X, yet another specification might be to instrument X with Male (because X is actually endogenous to Male):

ivreg2 y (X= male + other instruments) controls

If the Hansen J test is non-significant, it means that the effect of being Male on Y is mediated fully via X.

Of course, the suest and ivreg2 models are looking at different things; however, which is more defensible do you think?

I would be interested in your thoughts (and alternative modeling procedures if relevant).

Best,
J.

--
__________________________________________

Prof. John Antonakis
Faculty of Business and Economics
Department of Organizational Behavior
University of Lausanne
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http://www.hec.unil.ch/people/jantonakis

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The Leadership Quarterly
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