Re: st: AW: RE: re: question on XTOVERID

[Davillas Apostolos <davillas@upatras.gr>]

<>
Really many thanks!


On Mon, 22 Mar 2010 16:28:18 +0100, "Martin Weiss" <martin.weiss1@gmx.de>
wrote:
> <> 
> 
> 
> " Baltagi's
> textbook on panel data econometrics has a short exposition of the
> Hausman-Taylor model and includes a description of what the test of
> overidentifying restrictions after a H-T estimation actually tests."
> 
> 
> Yes, in sections 7.4 and 7.5, in particular page 135, around equation
> (7.46). Having worked with -xthtaylor- myself
>
(http://www.ingentaconnect.com/content/mohr/fa/2009/00000065/00000001/art000
> 06) I have to say that it is not an easily explored panel data command,
> because all sources in the literature use the same example, so
additional
> literature does not yield much insight for beginners...
> 
> 
> 
> HTH
> Martin
> 
> 
> -----Ursprüngliche Nachricht-----
> Von: owner-statalist@hsphsun2.harvard.edu
> [mailto:owner-statalist@hsphsun2.harvard.edu] Im Auftrag von Schaffer,
Mark
> E
> Gesendet: Montag, 22. März 2010 16:17
> An: statalist@hsphsun2.harvard.edu
> Betreff: st: RE: re: question on XTOVERID
> 
> Apostolos,
> 
> A quick addendum to what Kit has said: if I'm not mistaken, Baltagi's
> textbook on panel data econometrics has a short exposition of the
> Hausman-Taylor model and includes a description of what the test of
> overidentifying restrictions after a H-T estimation actually tests.
> 
> Best wishes,
> Mark
> 
>> -----Original Message-----
>> From: owner-statalist@hsphsun2.harvard.edu 
>> [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of Kit Baum
>> Sent: Monday, March 22, 2010 2:05 PM
>> To: statalist@hsphsun2.harvard.edu
>> Subject: st: re: question on XTOVERID
>> 
>> <>
>> > I am interesting in performing a Hausman-Taylor estimation 
>> in stata (using
>> > -xthtaylor command).However, as an attempt to test the 
>> assumptions required
>> > to get consistent estimators (that the most, except from 
>> the endogenous
>> > regressors, are not correlated with the time-invariant 
>> error term), I did
>> > following:
>> > xtahylor y x z e f x, endog(z) /// note f, x and z time invariant
>> > variables 
>> > estimates store xt 
>> > xtreg y x e, fe
>> > estimates store fe
>> > hausman fe xt 
>> > In other words, I test the differences between the 
>> co-efficients from the
>> > two models. If the H0 of no systematic difference was not 
>> rejected, the
>> > instrumentation of the z variable is sufficient to remove 
>> any correlation
>> > between the time-ivariant error term and the remaining regressors.
>> > I am wondering what the -XTOVERID, after the -xtahylor 
>> command, could
>> > exactly does? Reading the stata help file, I did not find 
>> any specific
>> > reference for the case using the command after the xtahylor 
>> (except from
>> > the calculation of the dof). 
>> 
>> There are two different sets of assumptions here. If you look 
>> at the example in -help xthtaylor-, and rerun that model
>> as a FE model, the -hausman- test will not reject its null 
>> there either. But that hausman test is run under the 
>> maintained hypothesis that the FE model is consistent. If it 
>> was consistent, why would you be using an instrumental 
>> variables approach such as H-T?
>> The hausman test has no power if the maintained hypothesis 
>> (that the first model is consistent under H0 and Ha) is violated.
>> 
>> If you run the example in -help hausman- and then do 
>> -xtoverid-, you get a strong rejection of the null that the 
>> overidentifying
>> restrictions are satisfied. In the case of H-T, the 
>> assumption is that some of the variables are correlated with the 
>> individual effect (rendering RE inconsistent) but that this 
>> can be dealt with using H-T. The second assumption is that ALL of the
>> variables are suitably independent of the idiosyncratic error 
>> term. This is being tested by -xtoverid-, and the rejection 
>> in this case
>> means, I believe, that the assumptions required for validity 
>> of the H-T estimates are violated. That could be true for many 
>> reasons, as in the usual IV case; e.g. omitted variables or 
>> wrong functional form.  If you apply -xtoverid- after a RE 
>> model, for which the assumption is that X is indep of the 
>> individual component, a rejection means that RE assumptions 
>> do not hold. 
>> I believe the inference here w.r.t. H-T is the same.
>> 
>> Kit Baum   |   Boston College Economics & DIW Berlin   |   
>> http://ideas.repec.org/e/pba1.html
>>                               An Introduction to Stata 
>> Programming  |   http://www.stata-press.com/books/isp.html
>>    An Introduction to Modern Econometrics Using Stata  |   
>> http://www.stata-press.com/books/imeus.html
>> 
>> 
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