Dear all,
I have a very basic question concerning a Hausman
test. I am comparing a fixed effects panel estimation
with a random effects one (see below). How do I
interpret the results of the Hausman test? Do they
mean that the random effects estimates are
inconsistent?
Looking forward to your answer and truly yours,
Lucio Vinhas de Souza
**************************************
. xtreg ltrade lgdp lpop eud emud trend, fe
Fixed-effects (within) regression Number
of obs = 57442
Group variable (i) : ipair Number
of groups = 2611
R-sq: within = 0.1548 Obs
per group: min = 22
between = 0.3077
avg = 22.0
overall = 0.2112
max = 22
F(5,54826) = 2008.23
corr(u_i, Xb) = 0.2545
Prob > F = 0.0000
-------------------------------------------------------
ltrade | Coef. Std. Err. t P>|t|
[95% Conf. Interval]
-------------+-----------------------------------------
lgdp | .0754704 .0292365 2.58 0.010
.0181668 .1327741
lpop | .5473182 .1313844 4.17 0.000
.2898038 .8048326
eud | -.2723743 .0951406 -2.86 0.004
-.4588506 -.085898
emud | -.9780319 .1085947 -9.01 0.000
-1.190878 -.7651856
trend | .1153878 .0018864 61.17 0.000
.1116905 .1190851
_cons | -10.33135 2.421705 -4.27 0.000
-15.07791 -5.584793
-------------+-----------------------------------------
sigma_u | 2.9860951
sigma_e | 1.8353774
rho | .7258032 (fraction of variance due
to u_i)
-------------------------------------------------------
F test that all u_i=0: F(2610, 54826) = 45.08
Prob > F = 0.0000
. hausman, save
. xtreg ltrade lgdp lpop eud emud trend
Random-effects GLS regression Number
of obs = 57442
Group variable (i) : ipair Number
of groups = 2611
R-sq: within = 0.1537 Obs
per group: min = 22
between = 0.3468
avg = 22.0
overall = 0.2963
max = 22
Random effects u_i ~ Gaussian Wald
chi2(6) = 11354.00
corr(u_i, X) = 0 (assumed) Prob >
chi2 = 0.0000
-------------------------------------------------------
ltrade | Coef. Std. Err. z P>|z|
[95% Conf. Interval]
-------------+-----------------------------------------
lgdp | .2138072 .026484 8.07 0.000
.1618996 .2657149
lpop | 1.477494 .0498542 29.64 0.000
1.379781 1.575206
eud | .0097496 .0884326 0.11 0.912
-.1635752 .1830744
emud | -1.025233 .1084758 -9.45 0.000
-1.237842 -.8126247
trend | .1032162 .001403 73.57 0.000
.1004664 .105966
_cons | -25.08318 1.038565 -24.15 0.000
-27.11873 -23.04763
-------------+-----------------------------------------
sigma_u | 2.5927197
sigma_e | 1.8353942
rho | .66616628 (fraction of variance due
to u_i)
-------------------------------------------------------
. hausman
---- Coefficients ----
(b) (B) (b-B)
qrt(diag(V_b-V_B))
| Prior Current Difference S.E.
-------------+-----------------------------------------
lpop | .5473182 1.477494 -.9301754
.1215583
eud | -.2723743 .0097496 -.2821239
.0350914
emud | -.9780319 -1.025233 .0472016
.0050788
trend | .1153878 .1032162 .0121716
.001261
-------------------------------------------------------
b= less efficient estimates obtained previously from
xtreg
B= fully efficient estimates obtained from xtreg
Test: Ho: difference in coefficients not systematic
chi2( 5) = (b-B)'[(V_b-V_B)^(-1)](b-B)= 167.24
Prob>chi2 = 0.0000
________________________________________________________________________
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