st: RE: AW: RE: Panel re vs. fe model

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

Thomas,

> -----Original Message-----
> From: owner-statalist@hsphsun2.harvard.edu 
> [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of 
> Thomas Erdmann
> Sent: Thursday, January 18, 2007 5:28 PM
> To: statalist@hsphsun2.harvard.edu
> Subject: st: AW: RE: Panel re vs. fe model
> 
> Mark,
> 
> Thanks for the fast reply. As you point out my goal is to 
> decide whether the fixed or random effects model is appropriate. 
> 
> As the model indicates that both firm and time effects are 
> present I use -xtreg, cluster()- (i.e. -cluster(id)- for the 
> firm effect) with addtitional time dummies. In this context I 
> encountered the discussion about the appropriateness of the 
> Hausman test.
> 
> That said, just to rephrase: implementing an artifical 
> regression as below gives me a more robust Hausman test that 
> works in the described setting?

Yes indeed.

> I was just wondering if I get too complicated or overlook 
> something, because an official Stata command seems to be 
> missing (other than -xttest0- for random effects) and I 
> assume that the setting described is not so uncommon? 

In fact, this comes up often enough for me to think that we should add it to xtoverid.

--Mark

> - Tom
> 
> 
> 
> -----Urspr�ngliche Nachricht-----
> Von: statalist-owner@hsphsun2.harvard.edu
> [mailto:statalist-owner@hsphsun2.harvard.edu] Im Auftrag von 
> Schaffer, Mark E
> Gesendet: Donnerstag, 18. Januar 2007 17:41
> An: statalist@hsphsun2.harvard.edu
> Betreff: st: RE: Panel re vs. fe model
> 
> Thomas,
> 
> > -----Original Message-----
> > From: owner-statalist@hsphsun2.harvard.edu
> > [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of Thomas 
> > Erdmann
> > Sent: Thursday, January 18, 2007 3:21 PM
> > To: statalist@hsphsun2.harvard.edu
> > Subject: st: Panel re vs. fe model
> > 
> > Hi -
> > 
> > The drawbacks of Hausman test regarding its asymptotic 
> assumptions or 
> > in a cluster setting are discussed at several points in the 
> Statalist.
> > 
> > e.g. http://www.stata.com/statalist/archive/2005-08/msg00741.html
> > or several others by e.g. searching for "fe re cluster 
> Hausman" in the 
> > archives.
> > 
> > My conclusion would be that using -suest- would be a good 
> alternative 
> > but is not possible because -xtreg, fe- does not produce scores. I 
> > found another alternative described here, 
> > http://www.stata.com/statalist/archive/2005-08/msg00853.html
> > where Vince Wiggins suggests using an artificial regression (find 
> > below).
> > 
> > Two questions: 
> > 
> > (1) Regarding the code below, could you just add the
> > -cluster()- option as further option and would the artificial 
> > regression still make sense?
> 
> Yes.
> 
> > (2) Are there yet other alternatives to the Hausman test in this 
> > setting?
> 
> The difference between the FE and RE specification is that 
> the latter uses more orthogonality conditions, and the 
> Hausman test in this context is just a GMM test of these 
> extra orthogonality conditions.  If you want to test 
> something else, then I suppose you would use an alternative 
> test, but I'm not sure what the something else would be.
> 
> Cheers,
> Mark
> 
> > Thanks for your feedback,
> > Tom
> > 
> > 
> > ---------------------------------- BEGIN --- artreg.do --- CUT HERE 
> > ------- local id idcode local depvar ln_wage local varlist ttl_exp 
> > union white
> > 
> > iis `id'
> > xtreg `depvar' `varlist' , re
> > 
> > local i 0
> > foreach var of varlist `varlist' {
> > 	egen mymean`++i' = mean(`var') if e(sample), by(`id') }
> > 
> > xtreg `depvar' `varlist' mymean1-mymean`i' , re
> > 
> > testparm mymean1-mymean`i'
> > ---------------------------------- END   --- artreg.do --- 
> > CUT HERE -------
> > 
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