Example of the problem:
Suppose I use the following dataset provided by Stata:
Code:
use http://www.stata-press.com/data/r13/nlswork
And I run the following IV regression:
Code:
xtivreg ln_w age c.age#c.age not_smsa (tenure = union south), fe
I get the following result:
Code:
. xtivreg ln_w age c.age#c.age not_smsa (tenure = union south), fe Fixed-effects (within) IV regression Number of obs = 19,007 Group variable: idcode Number of groups = 4,134 R-sq: Obs per group: within = . min = 1 between = 0.1304 avg = 4.6 overall = 0.0897 max = 12 Wald chi2(4) = 147926.58 corr(u_i, Xb) = -0.6843 Prob > chi2 = 0.0000 ------------------------------------------------------------------------------ ln_wage | Coef. Std. Err. z P>|z| [95% Conf. Interval] -------------+---------------------------------------------------------------- tenure | .2403531 .0373419 6.44 0.000 .1671643 .3135419 age | .0118437 .0090032 1.32 0.188 -.0058023 .0294897 | c.age#c.age | -.0012145 .0001968 -6.17 0.000 -.0016003 -.0008286 | not_smsa | -.0167178 .0339236 -0.49 0.622 -.0832069 .0497713 _cons | 1.678287 .1626657 10.32 0.000 1.359468 1.997106 -------------+---------------------------------------------------------------- sigma_u | .70661941 sigma_e | .63029359 rho | .55690561 (fraction of variance due to u_i) ------------------------------------------------------------------------------ F test that all u_i=0: F(4133,14869) = 1.44 Prob > F = 0.0000 ------------------------------------------------------------------------------ Instrumented: tenure Instruments: age c.age#c.age not_smsa union south ------------------------------------------------------------------------------
Thanks!
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