Sargan Test

[Hossein MahdaviMazdeh]

I am trying to run a dynamic panel on firms measuring their R&D intensity.
My equation in it's simplest form is like this:
xtabond rdintensity
estat sargan

Interestingly, even in this simple form I receive a zero p-value for the sargan test. I know that R&D intensity is highly path dependent and therefore the lag instruments may not be very strong exogenous instruments but is DPD is not designed to specifically deal with this problem(lagged dependent)? What should I do to resolve the issue? is it sound to just ignore this?

[Jeff Wooldridge]

The model you're estimating has a single lagged dependent variable. Maybe a second lag is needed, or more. In the context of this simple model, the overid test is a test of dynamic misspecification. How many years do you have?

[Hossein MahdaviMazdeh]

Thanks for answering,
My full model includes many other variables and I get the zero p-value with it. I thought simplifying the model to only one variable would make the problem go away (which did not)
I have a panel of 10 years and I have tested the model with only 3, 5, and 7 years as well and still no change.
I have also tried different maxldep options from 1 to 10 and still no hope!