The reason you can't test for the appropriateness of random effects is
because you haven't actually estimated a random effects model.
The Stata message that sigma_u=0 is telling you that with your particular
dataset and model, when you try to estimate a random effects model, what
you end up with is simply OLS. Try estimating the model with -regress- and
you'll see you get the same results.
... and since you haven't estimated a random effects model, you can't do a
Hausman test for it.
Hope this helps.
--Mark
Quoting M Silva <[email protected]>:
> I was wondering if anyone could help me with the following.
>
> After estimating a random-errors panel data model, I want to
> implement the
> Hausman test with the following command:
>
> . xthausman
>
>
> However, the output I get is:
>
> Estimate of sigma_u = 0, random-effects estimator has degenerated to
> pooled
> OLS and the Wald test from xthausman may not be appropriate. See
> [R]
> hausman
> for a more general implementation of the Hausman test.
> r(459);
>
> Does anyone know what I should do in order to implement the Hausman
> test for
> random errors in such case? Can I use the �hausman, save� and
> �hausman�
> commends?
>
> Thank you very much for your help.
>
> M. Silva
>
>
>
>
>
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Prof. Mark Schaffer
Director, CERT
Department of Economics
School of Management & Languages
Heriot-Watt University, Edinburgh EH14 4AS
tel +44-131-451-3494 / fax +44-131-451-3008
email: [email protected]
web: http://www.sml.hw.ac.uk/ecomes
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