st: re: fixed vs random effects

[Marcello Pagano <pagano@hsph.harvard.edu>]

> From: Kit Baum <kitbaum@mac.com>
> Date: February 3, 2007 7:59:54 AM EST
> To: statalist@hsphsun2.harvard.edu
> Subject: re: fixed vs random effects
>
> Shams said
>
> Kit Baum: Presence of more than one endogenous
> variable complicates estimating the equation using
> xtivreg2 (which is considered to be single equation
> model).
>
> Not so. xtivreg and xtivreg2 do not assume that there is a single  
> endogenous variable among the regressors, just as standard IV  
> regression allows for any number of endogenous regressors. You  
> merely have to be able to satisfy the equation via the rank and  
> order conditions, meaning that to estimate this single equation you  
> must list the instruments that *would appear* as regressors in the  
> other structural equations but *do not appear* in this one.
>
> It is a fallacy to think that system estimation (reg3) solves any  
> problems. It offers an efficiency gain over single equation (ltd.  
> info) estimation, period (and allows you to impose across-equation  
> constraints). If you cannot write down the single IV equation  
> satisfying conditions for identification, you cannot estimate it  
> with reg3 either. And in the panel setup you describe, you probably  
> need a FE or FD estimator in any case to deal with unobserved  
> heterogeneity.
>
>
> Kit Baum, Boston College Economics
> http://ideas.repec.org/e/pba1.html
> An Introduction to Modern Econometrics Using Stata:
> http://www.stata-press.com/books/imeus.html

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