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# st: RE: Interpreting ivreg2 outputs

 From DE SOUZA Eric <[email protected]> To "[email protected]" <[email protected]> Subject st: RE: Interpreting ivreg2 outputs Date Sun, 17 Apr 2011 21:44:54 +0200

```All the questions below are addressed either in the help file or in the following article which you can download for free:
http://www.stata-journal.com/article.html?article=st0030_3

Eric de Souza
College of Europe
Brugge (Bruges), Belgium
http://www.coleurope.eu

-----Original Message-----
From: [email protected] [mailto:[email protected]] On Behalf Of Hussain Samad
Sent: 17 April 2011 21:34
To: [email protected]
Subject: st: Interpreting ivreg2 outputs

Dear Statalist:

I'm trying to understand the output of ivreg2 command, especially various tests.

I very much appreciate if someone can explain. I have included necessary outputs

below. Please let me know if my understanding is correct or explain otherwise.

Endogeneity test:
P-val =0.0182, so exogeneity of the regressors is  rejected at 5% level (that is, they are endogenous). Correct?

Overidentification test (Hansen J statistics):
P-val  =0.1643, so overidentification restriction is satisfied (H0 cannot be rejected at 5% level). Correct?

Underidentification test (Kleibergen-Paap rk LM statistic):
P-val = 0.2358, so model is underidentified (H0 cannot be rejected at 5% level).

Correct? If so, what can be done to correct it?

Weak instrument test (Kleibergen-Paap rk Wald F statistic):
This is what I am most confused about. Which of the Stock-Yogo critical values I

compare with the F-stat? And what decision can be made based on my output? In case instruments are weak, what to do about it? Please guide.

Redundancy of instruments:
I know I can simply regress the endogenous variables on the instruments and check t-stats. But how can I come to a decision from the ivreg2 output?  Or, what commands I should use after ivreg2?

I know there are lot of questions. But I do not know where else to go except for

here. Again, thanks a lot for your help.

-Hussain

Command:
ivreg2 lgpcexpfmv agehead sexhead educhead maxeducm maxeducf lgland lgnland lgvpop vwage* vpaved vprimschl vsecschl vmarket velec vgb vngo vsnet chardumm riverdum phighland1 rainfall (memprime mfonly=vprime*), endog(memprime mfonly)
cluster(vill) ffirst;

Outputs:

Summary results for first-stage regressions
-------------------------------------------

Variable         | Shea Partial R2 |   Partial R2    |  F(  6,   290)    P-value
memprime    |     0.0382            |     0.0765       |       82.04
0.0000
mfonly            |     0.0012           |     0.0024       |        1.58
0.1514

NB: first-stage F-stat cluster-robust

Underidentification tests
Ho: matrix of reduced form coefficients has rank=K1-1 (underidentified)
Ha: matrix has rank=K1 (identified)
Kleibergen-Paap rk LM statistic             Chi-sq(5)=6.80     P-val=0.2358
Kleibergen-Paap rk Wald statistic           Chi-sq(5)=8.42     P-val=0.1345

Weak identification test
Ho: equation is weakly identified
Kleibergen-Paap Wald rk F statistic                 1.39
See main output for Cragg-Donald weak id test critical values

Weak-instrument-robust inference
Tests of joint significance of endogenous regressors B1 in main equation
Ho: B1=0 and overidentifying restrictions are valid
Anderson-Rubin Wald test     F(6,290)= 1.60      P-val=0.1474
Anderson-Rubin Wald test     Chi-sq(6)=9.68      P-val=0.1390
Stock-Wright LM S statistic  Chi-sq(6)=7.32         P-val=0.2924

NB: Underidentification, weak identification and weak-identification-robust
test statistics cluster-robust

Number of clusters                     N_clust  =        291
Number of observations                          N  =       5207
Number of regressors                             K  =         26
Number of instruments                            L  =         30
Number of excluded instruments           L1 =          6

IV (2SLS) estimation
--------------------
.
.
OUTPUT OMITTED ………………………
.
.
------------------------------------------------------------------------------
Underidentification test (Kleibergen-Paap rk LM statistic):
6.802

Chi-sq(5) P-val =    0.2358
------------------------------------------------------------------------------
Weak identification test (Kleibergen-Paap rk Wald F statistic):
1.391
Stock-Yogo weak ID test critical values:  5% maximal IV relative bias      15.72
10% maximal IV relative
bias                          9.48
20% maximal IV relative bias
6.08
30% maximal IV relative bias
4.78
10% maximal IV size
21.68
15% maximal IV size
12.33
20% maximal IV size
9.10
25% maximal IV
size                               7.42
Source: Stock-Yogo (2005).  Reproduced by permission.
NB: Critical values are for Cragg-Donald F statistic and i.i.d. errors.
------------------------------------------------------------------------------
Hansen J statistic (overidentification test of all instruments):
6.507

Chi-sq(4) P-val =    0.1643
-endog- option:
Endogeneity test of endogenous regressors:
8.013

Chi-sq(2) P-val =    0.0182
Regressors tested:    memprime mfonly
------------------------------------------------------------------------------
Instrumented:         memprime mfonly
Included instruments: agehead sexhead educhead maxeducm maxeducf lgland
lgnland lgvpop vwagem vwagef vwagec vpaved vprimschl

vsecschl vmarket velec vgb vngo vsnet chardumm

riverdum phighland1 rainfall Excluded instruments: vprime vprimeagehead vprimesexhead vprimeeduchead
vprimelgland vprimelgnland
------------------------------------------------------------------------------

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