Re: Antwort: Re: RE: st: Spurious inference from endogeneity tests

["Justina Fischer" <JAVFischer@gmx.de>]

Hi Andreas,

if this helps - you know that instead of interacting two variables you can simply split the sample by one of them (e.g. split by gender when you are interested in gender-specific differences)....leaving you with one endogenous variable only...

Best
Justina

-------- Original-Nachricht --------
> Datum: Wed, 18 Jan 2012 21:03:32 +0100
> Von: andreas.zweifel@uzh.ch
> An: statalist@hsphsun2.harvard.edu
> Betreff: Antwort: Re: RE: st: Spurious inference from endogeneity tests

> Hi Justina
> 
> this is a good idea, I have tried both rivtest and condivreg to adress the
> weak instruments problem. Unfortunately however, I have two instead of
> only one endogeneous regressors (since I model an interaction effect of the
> actually endogeneous variable with a control variable where the interaction
> term is by definition also endogeneous), and these commands are designed for
> IV settings with only one troublesome regressor. 
> 
> As it seems now, the best thing to do is to drop the weakest instruments
> in terms of the individual t-statistics in the two first-stage regressions
> as long as the Anderson-Rubin test statistic is large enough to ensure that
> the model is still correctly specified. Hopefully, the weak instrument
> tests in the first stage will indicate that the remaining instruments are
> becoming a bit stronger. But in the end I should decide based on the Hausman
> test whether to use 2SLS or not. Even though the Hausman test should be
> performed only after testing for overidentifying restrictions - however, with the
> overID test being quite useless if instruments are weak...
> 
> Best, 
> Andreas
> 
> -----owner-statalist@hsphsun2.harvard.edu schrieb: ----- 
> An: statalist@hsphsun2.harvard.edu
> Von: "Justina Fischer" 
> Gesendet von: owner-statalist@hsphsun2.harvard.edu
> Datum: 18.01.2012 18:14
> Betreff: Re: RE: st: Spurious inference from endogeneity tests
> 
> Hi
> 
> user-written command rivtest provides robust-to-weak-instruments test
> statistics - what you might need here (of course it is always better to search
> for stronger instruments in first place). 
> 
> See also the accompanying paper:
> http://econ.tulane.edu/RePEc/pdf/tul0901.pdf
> 
> 
> -------- Original-Nachricht --------
> > Datum: Wed, 18 Jan 2012 10:36:55 -0500
> > Von: Austin Nichols <austinnichols@gmail.com>
> > An: statalist@hsphsun2.harvard.edu
> > Betreff: Re: RE: st: Spurious inference from endogeneity tests
> 
> > In re
> > the poster's central question:
> > "I have to conclude from my specification tests that my coefficient
> > estimates from both OLS and 2SLS cannot be interpreted because 2SLS
> > does not succeed in resolving the endogeneity problem?"
> > I would answer yes.  Without better instruments, you have learned
> > nothing from 2SLS, including whether OLS is biased or not.  The overID
> > test is no good if you don't have strong instruments, since its
> > failure to reject the overID restrictions could be due merely to the
> > weakness of your excluded instruments.
> > 
> > On Tue, Jan 17, 2012 at 6:44 PM, Justina Fischer <JAVFischer@gmx.de>
> > wrote:
> > > wow. I am deeply impressed :-)
> > >
> > > Let us hope the authors provide user-written Stata commands soon....
> > >
> > > justina
> > > -------- Original-Nachricht --------
> > >> Datum: Tue, 17 Jan 2012 18:41:27 -0500
> > >> Von: Cameron McIntosh <cnm100@hotmail.com>
> > >> An: STATA LIST <statalist@hsphsun2.harvard.edu>
> > >> Betreff: RE: st: Spurious inference from endogeneity tests
> > >
> > >> The following papers will also be helpful:
> > >> Murray, M.P. (2006). Avoiding Invalid Instruments and Coping with
> Weak
> > >> Instruments. Journal of Economic Perspectives, 20(4),
> > >>
> >
> 111-132.http://www.eui.eu/Personal/Guiso/Courses/Econometrics/Murray_IV_jep_06.pdf
> > >>
> > >> Chao, J.C., & Swanson, N.R. (2005). Consistent estimation with a
> large
> > >> number of weak instruments. Econometrica, 73(5),
> > >>
> >
> 1673–1692.http://gemini.econ.umd.edu/jrust/econ623/files/chao_swanson_econometrica.pdf
> > >>
> > >> Nevo, A., & Rosen, A.M. (2010). Identification with Imperfect
> > Instruments.
> > >> The Review of Economics and Statistics, Accepted for publication.
> > >>
> > >> Kolesár, M., Chetty, R., Friedman, J.N., Glaeser, E.L., & Imbens,
> G.W.
> > >>  (October 2011). Identification and Inference with Many Invalid
> > Instruments.
> > >> NBER Working Paper No. 17519. http://www.nber.org/papers/w17519
> > >>
> > >> Cam
> > >> > Date: Wed, 18 Jan 2012 00:06:34 +0100
> > >> > From: JAVFischer@gmx.de
> > >> > Subject: Re: st: Spurious inference from endogeneity tests
> > >> > To: statalist@hsphsun2.harvard.edu
> > >> >
> > >> > Hi Andreas
> > >> >
> > >> > for judging whether instruments are weak or not I would as first
> step
> > >> look into the first stage regression results, look at the Shea R2,
> the
> > F-test
> > >> on the instruments, the single estimates....that tells you already a
> > lot.
> > >> Maybe use ivreg2.
> > >> >
> > >> > Maybe you have only one weak instrument in a set of instruments you
> > >> should exclude  (so the set is then strong, even though one single
> > weak
> > >> instrument may bias your results)
> > >> >
> > >> > Best
> > >> >
> > >> > Justina
> > >> >
> > >> >
> > >> > -------- Original-Nachricht --------
> > >> > > Datum: Tue, 17 Jan 2012 22:12:36 +0100
> > >> > > Von: andreas.zweifel@uzh.ch
> > >> > > An: statalist@hsphsun2.harvard.edu
> > >> > > Betreff: st: Spurious inference from endogeneity tests
> > >> >
> > >> > > Dear Statausers,
> > >> > >
> > >> > > I am concerned with an endogeneity problem in my sample of 126
> > firms
> > >> when
> > >> > > investigating the relationship between managerial disclosure and
> > cost
> > >> of
> > >> > > capital effects. After running the ivreg28 command, the
> > Cragg-Donald
> > >> test
> > >> > > F-statistic is 2.27, which indicates that my instruments are
> rather
> > >> weak.
> > >> > > However, my model appears to be correctly identified, because the
> > >> Anderson test
> > >> > > statistic for the first stage equation yields a p-value lower
> than
> > >> 0.01
> > >> > > and the Sargan test statistic is insignificant (p-value = 0.59).
> > Since
> > >> my
> > >> > > instruments have passed the overidentification test, I run the
> > ivendog
> > >> command
> > >> > > which is equivalent to a Hausman test. Again, the test statistic
> is
> > >> > > insignificant (p-value = 0.48).
> > >> > >
> > >> > > If I compare OLS and 2SLS, I find that only the former yields a
> > >> > > significant coefficient of managerial disclosure in the model
> > >> regressing cost of
> > >> > > capital on managerial disclosure. Considering the specification
> > tests
> > >> above, it
> > >> > > seems unlikely that 2SLS is an improvement over OLS. Thus I
> assume
> > >> that I
> > >> > > can take the OLS estimates for causal inference. Is this correct?
> > If
> > >> yes,
> > >> > > the point why I should not use 2SLS is likely due to the weakness
> > of
> > >> the
> > >> > > instruments and the small-sample bias. So I have to conclude from
> > my
> > >> > > specification tests that my coefficient estimates from both OLS
> and
> > >> 2SLS cannot be
> > >> > > interpreted because 2SLS does not succeed in resolving the
> > endogeneity
> > >> > > problem?
> > 
> > *
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> 
> -- 
> Justina AV Fischer, PhD
> COFIT Fellow
> World Trade Institute
> University of Bern
> 
> homepage: http://www.justinaavfischer.de/
> e-mail: javfischer@gmx.de. justina.fischer@wti.org
> papers: http://ideas.repec.org/e/pfi55.html
> 
> 
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-- 
Justina AV Fischer, PhD
COFIT Fellow
World Trade Institute
University of Bern

homepage: http://www.justinaavfischer.de/
e-mail: javfischer@gmx.de. justina.fischer@wti.org
papers: http://ideas.repec.org/e/pfi55.html


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