Code:
webuse nlswork, clear
xtset idcode
//OLS regression
regress ln_wage age collgrad
//fixed-effects linear regression
xtreg ln_wage age collgrad, fe
//gmm estimation, results match these of OLS, how to include idcode fixed-effects to match xtreg?
gmm (ln_wage - {xb: age collgrad _cons}), instruments(age collgrad)
Of course, in this simple example, I can use `xtreg` but I need `gmm` for a more involved example where I have multiple equations with endogenous variables in a panel data.
The results of the code above are pasted below.
Code:
. webuse nlswork, clear
(National Longitudinal Survey. Young Women 14-26 years of age in 1968)
. xtset idcode
panel variable: idcode (unbalanced)
. //OLS regression
. regress ln_wage age collgrad
Source | SS df MS Number of obs = 28,510
-------------+---------------------------------- F(2, 28507) = 2965.19
Model | 1122.22339 2 561.111694 Prob > F = 0.0000
Residual | 5394.46676 28,507 .189233057 R-squared = 0.1722
-------------+---------------------------------- Adj R-squared = 0.1721
Total | 6516.69015 28,509 .228583611 Root MSE = .43501
------------------------------------------------------------------------------
ln_wage | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
age | .0162795 .0003895 41.79 0.000 .015516 .017043
collgrad | .3988395 .0069794 57.15 0.000 .3851595 .4125194
_cons | 1.135051 .011479 98.88 0.000 1.112552 1.157551
------------------------------------------------------------------------------
. //fixed-effects linear regression
. xtreg ln_wage age collgrad, fe
note: collgrad omitted because of collinearity
Fixed-effects (within) regression Number of obs = 28,510
Group variable: idcode Number of groups = 4,710
R-sq: Obs per group:
within = 0.1026 min = 1
between = 0.0877 avg = 6.1
overall = 0.0774 max = 15
F(1,23799) = 2720.20
corr(u_i, Xb) = 0.0314 Prob > F = 0.0000
------------------------------------------------------------------------------
ln_wage | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
age | .0181349 .0003477 52.16 0.000 .0174534 .0188164
collgrad | 0 (omitted)
_cons | 1.148214 .0102579 111.93 0.000 1.128107 1.16832
-------------+----------------------------------------------------------------
sigma_u | .40635023
sigma_e | .30349389
rho | .64192015 (fraction of variance due to u_i)
------------------------------------------------------------------------------
F test that all u_i=0: F(4709, 23799) = 8.81 Prob > F = 0.0000
. //gmm estimations, results match these of OLS, how to include idcode fixed-effects?
. gmm (ln_wage - {xb: age collgrad _cons}), instruments(age collgrad)
Step 1
Iteration 0: GMM criterion Q(b) = 2.8447984
Iteration 1: GMM criterion Q(b) = 7.453e-28
Iteration 2: GMM criterion Q(b) = 8.448e-33
Step 2
Iteration 0: GMM criterion Q(b) = 4.585e-32
Iteration 1: GMM criterion Q(b) = 4.585e-32 (backed up)
note: model is exactly identified
GMM estimation
Number of parameters = 3
Number of moments = 3
Initial weight matrix: Unadjusted Number of obs = 28,510
GMM weight matrix: Robust
------------------------------------------------------------------------------
| Robust
| Coef. Std. Err. z P>|z| [95% Conf. Interval]
-------------+----------------------------------------------------------------
age | .0162795 .0004112 39.59 0.000 .0154737 .0170854
collgrad | .3988395 .0071752 55.59 0.000 .3847763 .4129026
_cons | 1.135051 .0114914 98.77 0.000 1.112529 1.157574
------------------------------------------------------------------------------
Instruments for equation 1: age collgrad _cons
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