# Practice IV - Exercise 2 open wage2.gdt # OLS without ability ols lwage const educ exper tenure --robust # OLS with IQ as ability ols lwage const educ exper tenure IQ --robust # Hausman Test # Reduced form for IQ: with KWW and meduc as instruments ols IQ const educ exper tenure KWW meduc --robust uhat = $uhat # alternatively: series ehat=$uhat # Second step Hausman test ols lwage const educ exper tenure IQ uhat --robust omit uhat --quiet #or just look at the t-statistic for uhat #We can get Hausman from IV tsls lwage const educ exper tenure IQ; const educ exper tenure KWW meduc --robust # Validity of instruments: correlation with IQ ols IQ const educ exper tenure KWW meduc --robust omit KWW meduc --wald --quiet #Exogeneity: Sargan tsls lwage const educ exper tenure IQ; const educ exper tenure KWW meduc --robust utsls = $uhat ols utsls const educ exper tenure KWW meduc --robust extest = $rsq*$T pvalue X 1 extest # IV estimation tsls lwage const educ exper tenure IQ; const educ exper tenure KWW meduc --robust