[R] Hausman Test

[Achim Zeileis]

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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