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Questions tagged [hausman]

The Hausman test can be used to choose between two estimators where one is less efficient but consistent under both alternatives whereas the other is more efficient but only consistent under the null hypothesis.

The Hausman test can be used to choose between two estimators where one is less efficient but consistent under both alternatives whereas the other is more efficient but only consistent under the null hypothesis. The test statistic is $$H = (\beta_{a}-\beta_{b})'[Var(\beta_{a})-Var(\beta_{b})]^{-1}(\beta_{a}-\beta_{b})$$ where $a$ is the consistent estimator and $b$ is the efficient estimator. Typical examples for such comparisons are IV v.s. OLS and fixed effects v.s. random effects in panel data.

For more information on heteroscedasticity robust, cluster robust or bootstrapped versions of the test see

  • Cameron and Trivedi (2010) "Microeconometrics Using Stata", Stata Press
  • Wooldridge (2010) "Econometric Analysis of Cross Section and Panel Data", MIT Press
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Interpretation of ivreg() diagnostics in R

I'm trying to wrap my head around interpreting the diagnostics of the ivreg() command in R, from the {AER} package. Running the example code provided in the help page: ## data data("CigarettesSW", package = "AER") CigarettesSW$rprice <-…
Miguel
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How to deal with omitted dummy variables in a fixed effect model?

I am using a fixed effect model for my panel data (9 years, 1000+ obs), since my Hausman test indicates a value $(Pr>\chi^2)<0.05$. When I add dummy variables for industries that my firms included, they always get omitted. I know there is a big…
BEF
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Hausman test for panel data, fe and re. Error in the estimation, what to do? Stata

I am performing a Hausman test on panel data to determine whether to choose Random Effects or Fixed Effects for my analysis. After performing the test I get this error: chi2(2) = (b-B)'[(V_b-V_B)^(-1)](b-B) = -8.32 …
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How to use the Hausman test for gender discrimination?

I am trying to estimate the gender wage gap for male and female office workers in a large Swedish company to test whether there is gender discrimination. The Hausman test rejects the null that the individual fixed effects are random and therefore I…
kerst
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Hausman test: Include or not year effects and/or interaction variables

I have a problem when performing a Hausman test. I have a panel dataset that has five panels. I am estimating the same model twice, once using quarterly and another using half-year data. My dependent variable and some of my explanatory variables…
Herman Haugland
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Hausman test - wrong conclusion

I'm performing a Hausman test in Stata 11. After the test the conclusion is to use FE panel model. In my model I have 6 variables. In FE model only one has a significant effect and in RE model 4 variables have a significant effect on the dependent…
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Hausman test: the larger the sample the more significant the Hausman test statistic?

Hausman test statistic formula: $$ H=(\beta_{f}-\beta_{r})' \left[\mathrm{Cov}(\beta_{f})-\mathrm{Cov}(\beta_{r})\right]^{-1}(\beta_{f}-\beta_{r} ) $$ where $\beta_{f}$ is the beta of fixed effects model and $\beta_{r}$ is the beta of random…
bob
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Hausman Test interpretation is based on the p-value? - R output

I obtained the following output after running the Hausman test: 1) CASE 1 Hausman Test chisq = 13.943, df = 4, p-value = 0.007478 alternative hypothesis: one model is inconsistent 2) CASE 2 Hausman Test chisq = 0.49157, df = 4, p-value = 0.9743…
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Hausman test for Independence of Irrelevant Alternatives (IIA), negative value

I get a negative value for the Hausman test for the independence of irrelevant alternatives (IIA) assumption. Now I find contradicting conclusions in the literature: some people say that I should take the absolute value, others say that the value…
rbm
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Should a Hausman test be used to decide between fixed vs. random effects?

I was taught that a Hausman test should be used in multilevel modeling in order to check whether random effects can be used. However, I have now stumbled over several sources stating that the Hausman test is actually being misunderstood when using…
Nerd
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Hausman test - Theory and generalizations

Hausman test is used to compare two estimators which are both consistent under the null hypothesis but one is less efficient than the other. During my course of Econometrics, I have found that Hausman test can be used in many different settings and…
PhDing
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Serial correlation: estimation vs robust SE

We have route-level data (that I cannot share) on monthly bus ridership in New York City, creating a panel $N= 185$, $T=36$. We estimate a fixed effects model and random effects model with R's plm package. (For this MWE, I use the Grunfeld…
gregmacfarlane
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Heteroskedasticity removed through fixed effect estimation?

I have a large panel data set. Examination of a pooled OLS regression with Breusch Pagan showed heteroskedasticity with all model specifications. I consequently chose to use panel-corrected standard error parameter estimates (PCSE, after Beck and…
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Multinomial Logistic Regression: IIA violated - What to do?

I have a data set with 561 observations. I want to compare two groups on an outcome measure with 3 categories. I have a couple of covariates. I used the following syntax (Stata SE 12.1): mlogit outcome_measure covariate_1 covariate_2 i.covariate_3…
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Hausman test: Why requirement of positive definite covariance matrix?

Can someone please explain to me why the covariance matrix needs to be positive definite for the Hausman test? And why we can skip this restriction by applying the "test of overidentifying restrictions"? Isn't the issue easily explainable when…
patricia89
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