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st: RE: Weak instrument tests in small panel data


From   "Schaffer, Mark E" <[email protected]>
To   "[email protected]" <[email protected]>
Subject   st: RE: Weak instrument tests in small panel data
Date   Fri, 14 Feb 2014 12:44:33 +0000

Steven,

My guess is that you have a model where the iid assumption fails, and so there is a big difference between the standard first-stage F statistic (Cragg-Donald) and a cluster-robust first-stage F statistic (Kleibergen-Paap).  This is probably also why the partial R2 from the first stage also looks large.

FYI the Anderson-Rubin test is not a test for weak instruments, but a weak-instrument-robust test of H0: beta=0 (where beta is the coefficient on the endogenous regressor).  If you want to go down this route, you might have a look at -weakiv- by Magnusson-Finlay-Schaffer, available from SSC in the usual way.

HTH,
Mark

> -----Original Message-----
> From: [email protected] [mailto:owner-
> [email protected]] On Behalf Of Xiao, Chong
> Sent: 13 February 2014 20:40
> To: [email protected]
> Subject: st: Weak instrument tests in small panel data
> 
> Dear statalist users:
> 
> I have an unbalanced panel data that consists of about 40 groups in the cross
> section and 21 periods. I have two instruments and one endogenous variable
> that are all time-invariant.
> When I run the 2SLS regression, the Kleibergen-Paap F statistic is below the
> conventional critical value of 10, but the Shea Partial R2 is more than 10% and
> the Anderson-Rubin tests
> also show up strong. The first stage estimates for the instruments are also
> significant. I suspect that it is the small sample that drives the low F statistic.
> But could anyone
> provide more detailed explanations to reconcile the discrepancy between the
> various weak instrument test results? Thanks!
> 
> Number of clusters =      47                Number of obs =      876
> Anderson-Rubin Wald test           F(2,46)=        6.27     P-val=0.0039
> Anderson-Rubin Wald test           Chi-sq(2)=     12.98     P-val=0.0015
> Underidentification test (Kleibergen-Paap rk LM statistic):             10.191
>                                                     Chi-sq(2) P-val =    0.0061
> Weak identification test (Cragg-Donald Wald F statistic):              114.638
>                          (Kleibergen-Paap rk Wald F statistic):          8.952
> 
> sheapr2  .20971431
> 
> Best,
> Steven Xiao
> 
> 
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