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We present a minimum distance approach for conducting hypothesis testing in the presence of potentially weak instruments. Under this approach, we propose size-correct tests for limited dependent variable models with endogenous explanatory variables such as endogenous tobit and probit models. Additionally, we extend weak-instrument tests for the linear instrumental-variables model by allowing for variance–covariance estimation that is robust to arbitrary heteroskedasticity or intracluster dependence. We invert these tests to construct confidence intervals on the coefficient of the endogenous variable. We also provide a postestimation command for Stata, called rivtest, for computing the tests and estimating confidence intervals.

Keywords: rivtest ; ivregress ; ivprobit ; ivtobit ; condivreg ; ivreg2 ; weak instruments ; endogenous tobit ; endogenous probit ; two-stage least squares ; hypothesis testing ; confidence intervals

Subject(s): Research Methods/ Statistical Methods

Issue Date: 2009

Publication Type: Journal Article

DOI and Other Identifiers: st0171 (Other)

PURL Identifier: http://purl.umn.edu/142997 Published in: Stata Journal, Volume 09, Number 3 Page range: 398-421

Total Pages: 24

Record appears in: Stata Journal





Author: Finlay, Keith ; Magnusson, Leandro M.

Source: http://ageconsearch.umn.edu/record/142997?ln=en







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