* ct_ivgmm.do based on mus06p1iv.do January 2009 for Stata version 10.0 log using ct_ivgmm.txt, text replace ********** OVERVIEW OF ct_ivgmm.do ********** * STATA Program * For A. Colin Cameron and Pravin K. Trivedi "Lectures in Microeconometrics" * IV, 2SLS and linear GMM * To run you need file * mus06data.dta * in your directory * Stata add-on condivreg is used ********** SETUP ********** set more off version 10.0 set mem 10m set scheme s1mono /* Graphics scheme */ ********** DATA DESCRIPTION ********** * The original data is from the Medical Expenditure Panel Survey (MEPS) * for individuals over the age of 65 years ********** INSTRUMENTAL VARIABLES EXAMPLE * Read data, define global x2list (exogenous regressors), and summarize data use mus06data.dta global x2list totchr age female blhisp linc keep if linc != . describe ldrugexp hi_empunion $x2list summarize ldrugexp hi_empunion $x2list * Define the exogenous regressors using global x2list global x2list totchr age female blhisp linc * OLS regress ldrugexp hi_empunion $x2list, vce(robust) * Two available instruments for hi_empunion describe ssiratio multlc summarize ssiratio multlc correlate hi_empunion ssiratio multlc * IV estimator with ssiratio as single instrument for hi_empunion ivregress 2sls ldrugexp (hi_empunion = ssiratio) $x2list, vce(robust) * 2SLS estimator with ssiratio and multlc as instruments for hi_empunion ivregress 2sls ldrugexp (hi_empunion = ssiratio multlc) $x2list, vce(robust) * Robust version of Hausman test using augmented regression quietly ivregress 2sls ldrugexp (hi_empunion = ssiratio) $x2list, vce(robust) estat endogenous * Robust Hausman-Wu test of endogeneity implemented manually quietly regress hi_empunion ssiratio $x2list quietly predict v1hat, resid quietly regress ldrugexp hi_empunion v1hat $x2list, vce(robust) test v1hat * Weak instrument tests - just-identified model quietly ivregress 2sls ldrugexp (hi_empunion = ssiratio) $x2list, vce(robust) estat firststage, forcenonrobust all * Conditional test and confidence intervals when weak instruments condivreg ldrugexp (hi_empunion = ssiratio) $x2list, lm ar 2sls test(0) * GMM estimator with ssiratio and multlc as instruments for hi_empunion ivregress gmm ldrugexp (hi_empunion = ssiratio multlc) $x2list, vce(robust) * Test of overidentifying restrictions following ivregress gmm quietly ivregress gmm ldrugexp (hi_empunion = ssiratio multlc) $x2list, wmatrix(robust) estat overid * Compare estimators quietly regress ldrugexp hi_empunion $x2list, vce(robust) estimates store OLS quietly ivregress 2sls ldrugexp (hi_empunion = ssiratio multlc) $x2list, vce(robust) estimates store IV quietly ivregress 2sls ldrugexp (hi_empunion = ssiratio) $x2list, vce(robust) estimates store TWOSLS quietly ivregress gmm ldrugexp (hi_empunion = ssiratio multlc) $x2list, vce(robust) estimates store GMM estimates table OLS IV TWOSLS GMM, b(%9.4f) se(%9.3f) stats(N r2 F) * CLOSE OUTPUT * log close * clear * exit