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st: ivgmm0 v ivreg2

From   Kit Baum <[email protected]>
To   [email protected]
Subject   st: ivgmm0 v ivreg2
Date   Tue, 16 Mar 2004 14:45:09 -0500

A recent posting reported inconsistencies in ivgmm0 (Baum and Drukker) in terms of that routine being unable to match official ivreg or ivreg2 (Baum, Schaffer, Stillman) for an exactly-identified equation. Such an equation, estimated by GMM, should match IV regression results with a J-statistic of zero. In this peculiar case, the equation had only one (endogenous) regressor and one instrument, with no constant term. Both ivreg and ivreg2 will exclude the constant from both the regressor list and instrument list in that case. ivgmm0 was doing the former but not the latter. The corrected version, available from SSC, handles this case properly. The output matches ivreg2 perfectly, and matches ivreg but for standard errors (which have an n-k divisor in ivreg, but a divisor of n in ivgmm0).

Thanks to Mark Schaffer for helping locate the bug.


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