Dear Statalist,
I am trying to inroduce instrumental variables to fix the endogeneity
problem caused by fixed and random effects regressions. How can I determine
which independent variables are endogenous, i.e. correlated with the error
term? I simply gave the command "pw resid var1 var2 var3 var4" and it gave a
matrix where one of the variables showed a correlation with resid. Does it
mean that this variable is endogenous or is there any other way? The reason
I am asking this, perhaps, strange question is, in STATA7, the xtabond
command requires predetermined variables in the sense that E(x, error) is
nonzero.
Thank you,
Katarina
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