Dear all,

I’ve got a couple questions regarding tsls and the
automatic specification tests gretl does.

First, in a model with k (potentially) endogenous
regressors, gretl seems to use k-1 degrees of freedom for the Hausman test rather
than k. My impression is that gretl uses the “variable addition”
form (eg, Greene p. 323), is that right? If so, shouldn’t the the df be k?

The specific model I’m using is from Verbeek’s “schooling”
data set. Log wage is the dependent variable, with “black”, “south76”
and “smsa76” as exogenous regressors; education, experience and its
square (“ed76”, “exp76”, “exp762”) are
instrumented regressors. The instruments are age, its square, and a “near
college” dummy (plus the 3 exogenous x’s). If I “align”
the regressor and instrument lists like this:

Model 21: TSLS, using observations 1-3010

Dependent variable: lwage76

Instrumented: ed76 exp76 exp762

Instruments: const black smsa76 south76 nearc4a
age76 sq_age76

then I don’t get the weak instruments test. But if I
switch the order to this:

Instruments: const black smsa76 south76 age76
sq_age76 nearc4a

I get the test, but with all 0’s for the critical
values:

Weak instrument test -

Cragg-Donald minimum eigenvalue = 1.53611

Critical values for TSLS bias relative to
OLS:

bias 5%
10% 20% 30%

value
0.00 0.00
0.00 0.00

Similar things happen with over-identified models (although
in that case I get non-zero critical values). I don’t know as much about these
tests as I should, but does the ordering of the instruments really matter?

Thanks in advance for any help!

PS

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Dr. Peter Summers

Assistant Professor

Department of Economics

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