st: Re: hausman's test with xtivreg2

[Kit Baum <baum@bc.edu>]

I would have to wonder whether the execution of the 'conditional  
moment' test in the xtreg,fe setting was done correctly. If xtivreg2  
cannot detect any evidence of endogeneity, then any asymptotically  
equivalent test should yield qualitatively similar results, even if  
one test is more powerful than the other in finite samples.


Kit Baum, Boston College Economics
http://ideas.repec.org/e/pba1.html
An Introduction to Modern Econometrics Using Stata:
http://www.stata-press.com/books/imeus.html


On Apr 21, 2007, at 2:33 AM, statalist-digest wrote:


> in a previous email you mentioned the possibility that the endogeneity
> test can be done within the FE context or the IV framework:
> Kit said:
> "I think what is being confused here is that one could do two Hausman
> tests in a FE context: one for FE vs RE (which does question the
> correlation between regressor and fixed effect) and another, in the
> pure FE context, for endogeneity of regressors. That is, the test of
> OLS vs IV for the LSDV model. The former Hausman test would look at
> the correlation between regressor (mangerial ownership) and the firm-
> specific effect, but if done purely in a OLS/LSDV framework, could be
> weakened if OLS is inappropriate in the first place. But I don't see
> how that critique would apply if the test was done in a IV framework,
> allowing for endogeneity of regressors."
>
> I obtained the conditional moment test within the FE suggested in the
> paper and found strong rejection for exogeneity (unlike what I find
> with the endog option in xtivreg2).
>
> If you have any thoughts on this, it would be truly appreciated.
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