Hi
I am doing an empirical study on impact of IPRs on income-inequality in developing countries. I am running a regression of income inequality on iprs and other control variables.Since I have a dynamic panel specification, I am using xtabond2 command.My regression eq looks like:
Income Ineq = b1 +b2. IPRs +b3.lgdp_IPR +b4.controls
lgdp is log of per capita GDP and lgdp_IPR is an interaction term of IPR and lgdp.IPRs is intellectual property rights index that takes up a value ranging between 1 to 5.
While estimating the regression eq, I consider IPRs as an endog. variable which is instrumented by its lags while using xtabond2 command.Since i am treating IPRs and log of per capita GDP as endogenous, their interaction is also considered as endogenous.Problem is coefficients of all other explanatory variables become insignificant when i include the interaction term in my specification.
I have an unbalanced panel of 60 countries.Following are the commands that I am using:
My results become insignificant when i include the interactive term.If I instrument the interactive term with deeper lags, then difference in hansen tests suggests my instruments are invalid..x.My IPR index data changes slowly over period of time.IPR data is like:
Please advise
I am doing an empirical study on impact of IPRs on income-inequality in developing countries. I am running a regression of income inequality on iprs and other control variables.Since I have a dynamic panel specification, I am using xtabond2 command.My regression eq looks like:
Income Ineq = b1 +b2. IPRs +b3.lgdp_IPR +b4.controls
lgdp is log of per capita GDP and lgdp_IPR is an interaction term of IPR and lgdp.IPRs is intellectual property rights index that takes up a value ranging between 1 to 5.
While estimating the regression eq, I consider IPRs as an endog. variable which is instrumented by its lags while using xtabond2 command.Since i am treating IPRs and log of per capita GDP as endogenous, their interaction is also considered as endogenous.Problem is coefficients of all other explanatory variables become insignificant when i include the interaction term in my specification.
I have an unbalanced panel of 60 countries.Following are the commands that I am using:
Code:
. xi:xtabond2 NetGini l.NetGini tradeinflow pol civil sch_sec FDI lgdp IPR i.year, iv(i.year , equation(level))gmm( sc > h_sec pol civil , lag(1 1)coll) gmm(l. NetGini IPR , lag(3 3)) gmm( lgdp FDI tradeinflow, lag(2 4) coll) two robust > small i.year _Iyear_1-7 (naturally coded; _Iyear_1 omitted) Favoring space over speed. To switch, type or click on mata: mata set matafavor speed, perm. _Iyear_6 dropped due to collinearity Warning: Two-step estimated covariance matrix of moments is singular. Using a generalized inverse to calculate optimal weighting matrix for two-step estimation. Difference-in-Sargan/Hansen statistics may be negative. Dynamic panel-data estimation, two-step system GMM ------------------------------------------------------------------------------ Group variable: count Number of obs = 318 Time variable : year Number of groups = 60 Number of instruments = 38 Obs per group: min = 4 F(13, 59) = 82.70 avg = 5.30 Prob > F = 0.000 max = 6 ------------------------------------------------------------------------------ | Corrected NetGini | Coef. Std. Err. t P>|t| [95% Conf. Interval] -------------+---------------------------------------------------------------- NetGini | L1. | .7507057 .0702816 10.68 0.000 .6100726 .8913388 | tradeinflow | -.0192333 .0069845 -2.75 0.008 -.0332093 -.0052573 pol | .7958731 .3595149 2.21 0.031 .0764854 1.515261 civil | -1.130563 .5462879 -2.07 0.043 -2.223682 -.037443 sch_sec | 1.081968 .7887031 1.37 0.175 -.496223 2.660159 FDI | .2054799 .1475252 1.39 0.169 -.0897173 .500677 lgdp | -1.658037 .9181514 -1.81 0.076 -3.495254 .1791794 IPR | -1.130677 .5105886 -2.21 0.031 -2.152363 -.108992 _Iyear_2 | -1.387087 1.284979 -1.08 0.285 -3.958323 1.18415 _Iyear_3 | .0444003 1.134693 0.04 0.969 -2.226116 2.314916 _Iyear_4 | .6515202 .5685489 1.15 0.256 -.4861436 1.789184 _Iyear_5 | .4052887 .3017652 1.34 0.184 -.198542 1.009119 _Iyear_7 | .118279 .3462677 0.34 0.734 -.5746012 .8111591 _cons | 26.64445 8.340958 3.19 0.002 9.954235 43.33467 ------------------------------------------------------------------------------ Instruments for first differences equation GMM-type (missing=0, separate instruments for each period unless collapsed) L(2/4).(lgdp FDI tradeinflow) collapsed L3.(L.NetGini IPR) L.(sch_sec pol civil) collapsed Instruments for levels equation Standard _Iyear_2 _Iyear_3 _Iyear_4 _Iyear_5 _Iyear_6 _Iyear_7 _cons GMM-type (missing=0, separate instruments for each period unless collapsed) DL.(lgdp FDI tradeinflow) collapsed DL2.(L.NetGini IPR) D.(sch_sec pol civil) collapsed ------------------------------------------------------------------------------ Arellano-Bond test for AR(1) in first differences: z = -1.62 Pr > z = 0.105 Arellano-Bond test for AR(2) in first differences: z = -1.41 Pr > z = 0.159 ------------------------------------------------------------------------------ Sargan test of overid. restrictions: chi2(24) = 27.43 Prob > chi2 = 0.285 (Not robust, but not weakened by many instruments.) Hansen test of overid. restrictions: chi2(24) = 24.87 Prob > chi2 = 0.413 (Robust, but weakened by many instruments.) Difference-in-Hansen tests of exogeneity of instrument subsets: GMM instruments for levels Hansen test excluding group: chi2(10) = 11.01 Prob > chi2 = 0.356 Difference (null H = exogenous): chi2(14) = 13.85 Prob > chi2 = 0.461 gmm(sch_sec pol civil, collapse lag(1 1)) Hansen test excluding group: chi2(22) = 24.43 Prob > chi2 = 0.325 Difference (null H = exogenous): chi2(2) = 0.44 Prob > chi2 = 0.802 gmm(L.NetGini IPR, lag(3 3)) Hansen test excluding group: chi2(6) = 12.09 Prob > chi2 = 0.060 Difference (null H = exogenous): chi2(18) = 12.78 Prob > chi2 = 0.805 gmm(lgdp FDI tradeinflow, collapse lag(2 4)) Hansen test excluding group: chi2(12) = 8.13 Prob > chi2 = 0.775 Difference (null H = exogenous): chi2(12) = 16.74 Prob > chi2 = 0.160 iv(_Iyear_2 _Iyear_3 _Iyear_4 _Iyear_5 _Iyear_6 _Iyear_7, eq(level)) Hansen test excluding group: chi2(19) = 15.83 Prob > chi2 = 0.669 Difference (null H = exogenous): chi2(5) = 9.04 Prob > chi2 = 0.107 . xi:xtabond2 NetGini l.NetGini tradeinflow pol civil sch_sec FDI lgdp IPR lgdp_IPR i.year, iv(i.year , equation(leve > l))gmm( sch_sec pol civil , lag(1 1)coll) gmm(l. NetGini IPR , lag(3 3)coll) gmm( lgdp_IPR lgdp_IPR,lag(2 3)) gmm( lg > dp FDI tradeinflow, lag(2 4) coll) two robust small i.year _Iyear_1-7 (naturally coded; _Iyear_1 omitted) Favoring space over speed. To switch, type or click on mata: mata set matafavor speed, perm. _Iyear_6 dropped due to collinearity Warning: Two-step estimated covariance matrix of moments is singular. Using a generalized inverse to calculate optimal weighting matrix for two-step estimation. Difference-in-Sargan/Hansen statistics may be negative. Dynamic panel-data estimation, two-step system GMM ------------------------------------------------------------------------------ Group variable: count Number of obs = 318 Time variable : year Number of groups = 60 Number of instruments = 42 Obs per group: min = 4 F(14, 59) = 47.48 avg = 5.30 Prob > F = 0.000 max = 6 ------------------------------------------------------------------------------ | Corrected NetGini | Coef. Std. Err. t P>|t| [95% Conf. Interval] -------------+---------------------------------------------------------------- NetGini | L1. | .810713 .075913 10.68 0.000 .6588115 .9626146 | tradeinflow | -.0092124 .0086376 -1.07 0.291 -.0264962 .0080715 pol | .9882897 .4575124 2.16 0.035 .0728095 1.90377 civil | -1.283232 .606577 -2.12 0.039 -2.49699 -.0694744 sch_sec | -.1729401 .6369153 -0.27 0.787 -1.447405 1.101524 FDI | .0131383 .1196853 0.11 0.913 -.2263514 .252628 lgdp | -.3519632 .6173739 -0.57 0.571 -1.587325 .8833992 IPR | -.6190792 .7286319 -0.85 0.399 -2.077068 .8389098 lgdp_IPR | 2.583593 1.14272 2.26 0.027 .297017 4.87017 _Iyear_2 | -1.58519 1.408494 -1.13 0.265 -4.40358 1.2332 _Iyear_3 | .1295869 1.252443 0.10 0.918 -2.376546 2.63572 _Iyear_4 | 1.024117 .7369694 1.39 0.170 -.4505557 2.498789 _Iyear_5 | .586456 .4152121 1.41 0.163 -.2443814 1.417293 _Iyear_7 | -.0470631 .4969812 -0.09 0.925 -1.04152 .947394 _cons | 14.15091 5.085775 2.78 0.007 3.974294 24.32752 ------------------------------------------------------------------------------ Instruments for first differences equation GMM-type (missing=0, separate instruments for each period unless collapsed) L(2/4).(lgdp FDI tradeinflow) collapsed L(2/3).(lgdp_IPR lgdp_IPR) L3.(L.NetGini IPR) collapsed L.(sch_sec pol civil) collapsed Instruments for levels equation Standard _Iyear_2 _Iyear_3 _Iyear_4 _Iyear_5 _Iyear_6 _Iyear_7 _cons GMM-type (missing=0, separate instruments for each period unless collapsed) DL.(lgdp FDI tradeinflow) collapsed DL.(lgdp_IPR lgdp_IPR) DL2.(L.NetGini IPR) collapsed D.(sch_sec pol civil) collapsed ------------------------------------------------------------------------------ Arellano-Bond test for AR(1) in first differences: z = -1.77 Pr > z = 0.077 Arellano-Bond test for AR(2) in first differences: z = -1.97 Pr > z = 0.049 ------------------------------------------------------------------------------ Sargan test of overid. restrictions: chi2(27) = 47.77 Prob > chi2 = 0.008 (Not robust, but not weakened by many instruments.) Hansen test of overid. restrictions: chi2(27) = 36.09 Prob > chi2 = 0.113 (Robust, but weakened by many instruments.) Difference-in-Hansen tests of exogeneity of instrument subsets: GMM instruments for levels Hansen test excluding group: chi2(14) = 19.49 Prob > chi2 = 0.147 Difference (null H = exogenous): chi2(13) = 16.61 Prob > chi2 = 0.218 gmm(sch_sec pol civil, collapse lag(1 1)) Hansen test excluding group: chi2(23) = 32.99 Prob > chi2 = 0.081 Difference (null H = exogenous): chi2(4) = 3.10 Prob > chi2 = 0.542 gmm(L.NetGini IPR, collapse lag(3 3)) Hansen test excluding group: chi2(23) = 33.57 Prob > chi2 = 0.072 Difference (null H = exogenous): chi2(4) = 2.52 Prob > chi2 = 0.641 gmm(lgdp_IPR lgdp_IPR, lag(2 3)) Hansen test excluding group: chi2(11) = 17.68 Prob > chi2 = 0.089 Difference (null H = exogenous): chi2(16) = 18.41 Prob > chi2 = 0.300 gmm(lgdp FDI tradeinflow, collapse lag(2 4)) Hansen test excluding group: chi2(15) = 20.17 Prob > chi2 = 0.166 Difference (null H = exogenous): chi2(12) = 15.92 Prob > chi2 = 0.195 iv(_Iyear_2 _Iyear_3 _Iyear_4 _Iyear_5 _Iyear_6 _Iyear_7, eq(level)) Hansen test excluding group: chi2(22) = 28.01 Prob > chi2 = 0.175 Difference (null H = exogenous): chi2(5) = 8.08 Prob > chi2 = 0.152
country | year | gini_net | ipr | ||
Australia | 1 | 28.1872 | 2.49 | ||
Australia | 2 | 29.0448 | 2.49 | ||
Australia | 3 | 28.7599 | 3.28 | ||
Australi | 4 | 29.9817 | 4.33 | ||
Australia | 5 | 31.1922 | 4.33 | ||
Australia | 6 | 31.7795 | 4.33 |
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