st: RE: ivreg2 or xtabond2 endogeneity of regressors

["Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk>]

Jan,

By "dynamic GMM" I think you probably mean dynamic panel data estimation
a la xtabond, xtabond2, xtdpd, etc.

ivreg2 can do this, but it would be a major hassle because you'd have to
construct all the instrument sets by hand.  Can be done but not a lot of
fun.

The easier option is to use xtabond2 (or one of the other estimators)
and do an endogeneity test by hand as a GMM distance test, i.e., a
difference in J stats.  This is discussed briefly in the Baum et al. SJ
papers you cite; if you are looking for a textbook discussion, Hayashi's
(2000) "Econometrics" text covers it.  In a nutshell, the difference
between the J stat with the regressors treated as endogenous, and the J
stat with the regressors treated as exogenous, should be distributed as
chi2 (with dof=number of tested regressors) under the null that the
regressors being tested are exogenous.  The advantage of the ivreg2
implementation is that it uses a version of the test that is guaranteed
to be nonnegative in finite samples, but that's not a big deal.

BTW, you are mistaken about the documentation of the endog option of
ivreg2.  It is discussed in some detail in the Baum et al. (2007) paper.

HTH,
Mark

> -----Original Message-----
> From: owner-statalist@hsphsun2.harvard.edu 
> [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of 
> Dithmer, Jan
> Sent: 19 October 2011 10:39
> To: statalist@hsphsun2.harvard.edu
> Subject: st: ivreg2 or xtabond2 endogeneity of regressors
> 
> Dear all,
> 
> can the ivreg2 program of Baum et al. (2003, 2007) also be 
> used for dynamic GMM estimation in STATA or just for static 
> regressions?
> I am especially interested to use the program to test subsets 
> of regressors for endogeneity. According to the paper 
> "Instrumental variables  and GMM: Estimation and testing"
> I would use the orthog option in ivreg2. However, I am a bit 
> confused, because in the Stata program (ivreg2) the endog 
> option is available as well, which is not mentioned in the paper.
> Thus, would the endog option be the right choice for test for 
> endogeneity of regressors and orthog is used to test for 
> exogeneity of instruments?
> Or is there a possibility to do the same thing in xtabond2 of 
> David Roodman? I am working with panel data.
> 
> Thank you very much for your help!
> 
> Best,
> Jan
> 
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