Elizabeth,
From: "Asiedu, Elizabeth" <[email protected]>
To: "'[email protected]'" <[email protected]>
Subject: st: Endogeneity in a Panel Setting (Fixed Effects)
Date sent: Tue, 27 May 2003 09:40:36 -0500
Send reply to: [email protected]
> Dear all,
>
> I have an unbalanced panel of 91 countries over the period 1984-2000 (1024
> observations) and I'm using the fixed effects estimation, because it failed
> the Hausman test. I have two questions:
>
> 1. How do I test whether there is endogeneity?
91 countries means 91 dummy variables as regressors, so unless you
have lots of other regressors Stata should be able to manage it.
You therefore use ivreg (or ivreg2) to estimate the equation with the
country dummies as regressors, and then do an endogeneity test in the
usual way.
>
> 2. I can't reliable instruments for my endogenous variable. How do I resolve
> the problem of endogeneity if it exists?
This is the tough question! If you don't have instruments, then the
short answer is that you're stuck. (Indeed, you won't be able to do
an endogeneity test because for that you need to compare an IV
estimation with an OLS estimation.)
--Mark
>
>
> Thank you.
>
>
> Elizabeth Asiedu
>
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Prof. Mark E. Schaffer
Director
Centre for Economic Reform and Transformation
Department of Economics
School of Management & Languages
Heriot-Watt University, Edinburgh EH14 4AS UK
44-131-451-3494 direct
44-131-451-3008 fax
44-131-451-3485 CERT administrator
http://www.som.hw.ac.uk/cert
*
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