On Sun, 16 Jan 2011, Holger Steinmetz wrote:
Hi,
can anybody tell me how the Hausman test for endogenty works?
I have a simulated model with three correlated predictors (X1-X3). I also
have an instrument W for X1
Now I want to test for endogeneity of X1 (i.e., when I omit X2 and X3 from
the equation).
My current approach:
library(systemfit)
fit2sls <- systemfit(Y~X1,data=data,method="2SLS",inst=~W)
fitOLS <- systemfit(Y~X1,data=data,method="OLS")
print(hausman.systemfit(fitOLS, fit2sls))
This seems to work fine. However, when I include X2 as a furter predictor,
the 2sls-estimation doesn't work.
When you don't need any instruments for X2, then you should employ
Y ~ X1 + X2, inst = ~ W + X2
Then, regressor X2 is unaltered in the second stage of the regression
(after projection onto the instruments).
hth,
Z
Thanks in advance
Holger
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