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st: RE: Valid instrument test for exactly identified regression


From   "Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk>
To   <statalist@hsphsun2.harvard.edu>
Subject   st: RE: Valid instrument test for exactly identified regression
Date   Wed, 15 Jun 2011 13:42:17 +0100

Etanbay,

> -----Original Message-----
> From: owner-statalist@hsphsun2.harvard.edu 
> [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of 
> etanebay@yahoo.com
> Sent: 15 June 2011 11:11
> To: statalist@hsphsun2.harvard.edu
> Subject: st: Valid instrument test for exactly identified regression
> 
> Hi all,
> I have a model that is exactly identified, so the xtivreg2 
> command gives me a zero for the Hansen J statistic.
> Can you please advise: how do I test the validity of the IV, 
> that it doesn't correlate with the errors in the structural equation?

Short answer - you can't.

Slightly longer answer - you have one excluded instrument you are using
to identify one parameter.  That leaves you with no degrees of freedom
to test anything else: 1-1=0.

--Mark

> I know the IV is relevant from the first stage (1st stage 
> F-test, weak-instrument robust inference tests -- all reject 
> null at 99%).
> Thanks!
> E
> Sent from my BlackBerry Wireless Handheld Powered by Gee! from StarHub
> 
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