re: st: RE: ivreg2 and xtoverid error

[Kit Baum <Baum@bc.edu>]

<>
John said

I get exactly the same estimates and standard errors with -ivreg- and 
-ivregress-, with the cluster robust variance estimator.  When using 
-ivreg2- with the  -noid- option it works and I get the same estimates; 
more importantly, I also get the Hansen J-test, which is what interests 
me most (the -ivregress- estimator does not report an overid for 
cluster-robust vce's):

Hansen J statistic (overidentification test of all instruments): 
402.476, Chi-sq(404) P-val =  0.5121

The one thing to worry about here is that which arises with Sargan-Hansen tests after xtabond or user-written xtabond2: the overid test may not have much power when confronted with hundreds of instruments. 

You also mention the test provided by 'estat endogenous', which could be done in ivreg2 via the endog() option. This Durbin-Wu-Hausman test is merely telling you that you shouldn't use OLS on this model. But you're probably convinced of that in any event. Rejecting OLS as inconsistent does not imply that IV is consistent; that depends on the overid test of the excluded instruments (which you pass, but as mentioned may have low power to detect a problem) and the proper specification of the model. You might want to use ivreg2's orthog() option to consider just the non-dummy instruments as a group, and check to see that that Hansen "GMM distance" test also supports the notion that those excluded instruments are suitably orthogonal to the error.

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


*
*   For searches and help try:
*   http://www.stata.com/help.cgi?search
*   http://www.stata.com/support/statalist/faq
*   http://www.ats.ucla.edu/stat/stata/