Re: st: RE: Weak instrument tests in small panel data

["Xiao, Chong" <chong.Xiao@scheller.gatech.edu>]

Mark,

Thanks for your reply. Does it mean that for regressions with weak instruments, I should focus on those IV robust test results (Anderson-Rubin and other -weakiv- output) rather than the second stage estimate of standard errors in interpreting the effect of the endogenous variable?

Also the Anderson-Rubin result from -weakiv- seems to differ from that generated in -ivreg2-. Why is that?

Steven

On Feb 14, 2014, at 7:45 AM, "Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk> wrote:

> Steven,
> 
> My guess is that you have a model where the iid assumption fails, and so there is a big difference between the standard first-stage F statistic (Cragg-Donald) and a cluster-robust first-stage F statistic (Kleibergen-Paap).  This is probably also why the partial R2 from the first stage also looks large.
> 
> FYI the Anderson-Rubin test is not a test for weak instruments, but a weak-instrument-robust test of H0: beta=0 (where beta is the coefficient on the endogenous regressor).  If you want to go down this route, you might have a look at -weakiv- by Magnusson-Finlay-Schaffer, available from SSC in the usual way.
> 
> HTH,
> Mark
> 
>> -----Original Message-----
>> From: owner-statalist@hsphsun2.harvard.edu [mailto:owner-
>> statalist@hsphsun2.harvard.edu] On Behalf Of Xiao, Chong
>> Sent: 13 February 2014 20:40
>> To: statalist@hsphsun2.harvard.edu
>> Subject: st: Weak instrument tests in small panel data
>> 
>> Dear statalist users:
>> 
>> I have an unbalanced panel data that consists of about 40 groups in the cross
>> section and 21 periods. I have two instruments and one endogenous variable
>> that are all time-invariant.
>> When I run the 2SLS regression, the Kleibergen-Paap F statistic is below the
>> conventional critical value of 10, but the Shea Partial R2 is more than 10% and
>> the Anderson-Rubin tests
>> also show up strong. The first stage estimates for the instruments are also
>> significant. I suspect that it is the small sample that drives the low F statistic.
>> But could anyone
>> provide more detailed explanations to reconcile the discrepancy between the
>> various weak instrument test results? Thanks!
>> 
>> Number of clusters =      47                Number of obs =      876
>> Anderson-Rubin Wald test           F(2,46)=        6.27     P-val=0.0039
>> Anderson-Rubin Wald test           Chi-sq(2)=     12.98     P-val=0.0015
>> Underidentification test (Kleibergen-Paap rk LM statistic):             10.191
>>                                                     Chi-sq(2) P-val =    0.0061
>> Weak identification test (Cragg-Donald Wald F statistic):              114.638
>>                          (Kleibergen-Paap rk Wald F statistic):          8.952
>> 
>> sheapr2  .20971431
>> 
>> Best,
>> Steven Xiao
>> 
>> 
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