STATA users,
Your advice would be much appreciated on the following problem. I am
currently using IV GMM on a dynamic panel data model. One of the X
variables measures the amount of excess that every organisation in the
data set pays on its insurance policy. There are good reasons to believe
this is endogenous and this should be treated accordingly in
estimation. However, at a certain point in time, a policy change means
that none of the organisations has to pay this excess anymore and the
variable becomes zero from that point on and the endogeneity issue goes
away. I am not sure how to treat that variable in this case. Should I
treat it as endogenous (there are more time periods when it is
endogenous than it is exogenous) and assume that the instruments for
this are superfluous on the Sargan test from the point of switching to
being treated as exogenous or should I assume it to be exogenous
altogether for the whole time period? I don't seem to find a suitable
source for this in the literature and would appreciate some guidance
towards this and a solution to implement this in STATA if it exists.
Thanks in advance for your help.
Dev
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