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st: RE: negative Hausman Test and how to use Xtoverid


From   "Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk>
To   <statalist@hsphsun2.harvard.edu>
Subject   st: RE: negative Hausman Test and how to use Xtoverid
Date   Sun, 16 Jan 2011 21:48:17 -0000

May,

> -----Original Message-----
> From: owner-statalist@hsphsun2.harvard.edu 
> [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of May Ster
> Sent: 16 January 2011 16:31
> To: statalist@hsphsun2.harvard.edu
> Subject: st: negative Hausman Test and how to use Xtoverid
> 
> Dear all,
> 
> Please help on this issues as I wonder whether there is such 
> a test to conclude that the Hausman Taylor is more consistent 
> than the fixed effects estimator (which lacks lots of 
> efficiency in this case).
> 
> I'm currently working on Panel Data . In my data, panel var = 
> 90 units, time var = 38 years.
> In the model, It is assume to be a linear regression 
> containing individual effects ;
> 
> I use Xtreg lnA lnB lnC Dummy1 Dummy2 Dummy3
> 
> I then have checked for the appropriateness of the individual 
> effects model to be use. [The Hausman test proves fixed 
> effects model is preferred over the random effects model]
> 
> Then, I took the benefit of the Hausman-Taylor estimation as 
> according to the literatures the model should contain 
> correlations between some of explanatory variables and 
> individual effects. As well, using fixed effects model won't 
> be able to observe time-invariant variables.
> 
> My question is, is it necessary to perform another Hausman 
> Test to state again that the Hausman-Taylor is a consistent estimator?
> 
> However, I actually conducted the Hausman Test and found the 
> test showing negative value. I then consulted Statalist so 
> far on this issue. A lot of them say this case is common and 
> I should do as STATA suggested; using 'Suest'. But, 'Suest' 
> can't be applied with 'Xtreg',and then I became very doubtful.
> 
> Another way is to use the command 'XTOVERID' after 
> 'Xthtaylor' can be the way to obtain positive value of 
> Sargan-Hansen Statistic. But if I understand it correctly, 
> 'XTOVERID' is an over-identifying test to sort of signal that 
> instruments I have chosen are appropriate. I still do not see 
> how 'XTOVERID' can be used to compare whether the 
> Hausman-Taylor is more consistent than the fixed-effects in this case.
> I am certain that some use 'XTOVERID' to decide the fixed 
> effect versus the random effects models. But, how is it done 
> about comparing the Hausman-Taylor verus the fixed effects model?

There is a very brief discussion of this in the xtoverid help file.  The
H-T estimator is, in fact, an IV estimator, and if there are
overidentifying restrictions these can be tested.

Probably the best thing to do is to read about this either in the
original H-T paper or in a textbook discussion.  The various editions of
Baltagi's "Econometric Analysis of Panel Data" have a short but clear
discussion of how to interpret the overidentifying restrictions in a H-T
estimation.

HTH,
Mark

> Thank you very much in advance,
> Best Regards,
> 
> Orachat
> 
> 
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