On Tue, 20 Apr 2010, Summers, Peter wrote:
> I've got a couple questions regarding tsls and the automatic
> specification tests gretl does.
>
> First, in a model with k (potentially) endogenous regressors,
> gretl seems to use k-1 degrees of freedom for the Hausman test
> rather than k. My impression is that gretl uses the "variable
> addition" form (eg, Greene p. 323), is that right? If so,
> shouldn't the the df be k?
I'm going to defer on that one for now, but address the next
point.
> The specific model I'm using is from Verbeek's "schooling" data
> set. Log wage is the dependent variable, with "black", "south76"
> and "smsa76" as exogenous regressors; education, experience and
> its square ("ed76", "exp76", "exp762") are instrumented
> regressors. The instruments are age, its square, and a "near
> college" dummy (plus the 3 exogenous x's). If I "align" the
> regressor and instrument lists like this:
>
> Model 21: TSLS, using observations 1-3010
> Dependent variable: lwage76
> Instrumented: ed76 exp76 exp762
> Instruments: const black smsa76 south76 nearc4a age76 sq_age76
>
> then I don't get the weak instruments test. But if I switch the
> order to this:
>
> Instruments: const black smsa76 south76 age76 sq_age76 nearc4a
>
> I get the test, but with all 0's for the critical values:
The trouble is that gretl is not failing gracefully on an
impossible task. The correlation between age76 and sq_age76 is
0.9988, and (probably more relevant) the reciprocal condition
number of Z'Z (where Z is your instrument matrix) is 1.52e-10.
Stata 10 responds to "estat firststage" with a bunch of "not
available" messages. We should find a better criterion (or a
criterion at all) for supressing the first-stage test results
rather than printing garbage.
Allin Cottrell
