Question about exogeneity

[Julianna Grato]

I ran the following equations via fixed effects (one with a lead for union status, and one without a lead for union status)
xtreg lwage educ black Hispanic experience married union, fe
xtreg lwage educ black Hispanic experience married unionlead, fe

for the equation without the lead, union status was significant at every level, however, when a lead was used, it was not significant at .01 (significant at .05) Does this mean union status is not strictly exogenous?

Thank you.

[Phil Bromiley]

You didn't get a quick answer. You'll increase your chances of a useful answer by following the FAQ on asking questions - provide Stata code in code delimiters, readable Stata output, and sample data using dataex. We don't actually know the observation structure of lwage and unionlead. If you want union in the next year, F.union works just as well.

No, this is not how you test exogeneity. Suppose union really matters. When you use union(t+1) to explain lwage in t, you're simply adding noise since some with union jobs in t won't have union jobs in t+1. So, it is not surprising that you get a less significant parameter on unionlead. You'll do well to look at xtivreg2 and ivreg2 which provide tests of exogeneity.

[Julianna Grato]

I apologize Phil. This was my code without the lead:

xtreg lwage educ black hisp exper married union, fe

this was my code with the lead:

xtreg lwage educ black hisp exper married unionlead, fe

I thought that with strict exogeneity, the mean differenced errors can't be correlated with the regressors from anytime period. I thought that since union lead is not significant at the .01 I thought union was not strictly exogenous and something in the error term was correlated with it.

* Example generated by -dataex-. To install: ssc install dataex
clear
input float lwage byte(educ black hisp exper married) float unionlead
  1.19754 14 0 0  1 0 1
  1.85306 14 0 0  2 0 0
1.3444617 14 0 0  3 0 0
1.4332134 14 0 0  4 0 0
 1.568125 14 0 0  5 0 0
 1.699891 14 0 0  6 0 0
-.7202626 14 0 0  7 0 0
 1.669188 14 0 0  8 0 0
1.6759624 13 0 0  4 0 0
 1.518398 13 0 0  5 0 0
1.5591905 13 0 0  6 0 0
  1.72541 13 0 0  7 0 0
1.6220223 13 0 0  8 0 0
1.6085882 13 0 0  9 0 0
1.5723854 13 0 0 10 0 0
 1.820334 13 0 0 11 0 0
1.5159627 12 0 0  4 1 0
 1.735379 12 0 0  5 1 0
1.6317437 12 0 0  6 1 0
1.9982288 12 0 0  7 1 0
2.1840143 12 0 0  8 1 0
2.2666621 12 0 0  9 1 0
 2.069944 12 0 0 10 1 0
 2.873161 12 0 0 11 1 1
 1.894115 12 0 0  2 0 1
1.4711593 12 0 0  3 0 0
1.4734975 12 0 0  4 0 0
1.7409142 12 0 0  5 0 0
1.8232137 12 0 0  6 0 0
 1.908273 12 0 0  7 0 0
1.7424474 12 0 0  8 0 0
 2.135689 12 0 0  9 1 1
1.9487748 12 0 0  5 0 0
1.9622593 12 0 0  6 0 0
1.9632968 12 0 0  7 0 0
2.2025156 12 0 0  8 0 0
2.1349542 12 0 0  9 1 0
2.1258228 12 0 0 10 1 0
1.9910166 12 0 0 11 1 0
2.1123934 12 0 0 12 1 0
.25855488 10 0 0  2 0 0
1.3199717 10 0 0  3 0 0
1.4620852 10 0 0  4 0 0
 1.320287 10 0 0  5 0 0
1.7036465 10 0 0  6 0 0
 1.445803 10 0 0  7 0 0
 1.806364 10 0 0  8 0 0
2.1481202 10 0 0  9 0 0
1.7372855 13 0 0  2 0 0
 1.989601 13 0 0  3 0 0
2.1899168 13 0 0  4 0 0
1.8554633 13 0 0  5 0 0
1.9224378 13 0 0  6 0 0
 2.061024 13 0 0  7 1 0
1.7822016 13 0 0  8 1 0
 2.414682 13 0 0  9 1 0
1.2087353 12 0 0  2 0 0
1.1940397 12 0 0  3 0 0
1.1704406 12 0 0  4 0 0
1.0979645 12 0 0  5 0 0
 .7658162 12 0 0  6 0 0
 1.119026 12 0 0  7 0 0
1.1193668 12 0 0  8 0 1
 .8314595 12 0 0  9 0 1
.50247014 11 0 0  2 0 0
1.0649123 11 0 0  3 0 0
 1.189498 11 0 0  4 0 0
1.5398885 11 0 0  5 0 0
 1.598286 11 0 0  6 0 0
1.7373207 11 0 0  7 0 0
 1.988456 11 0 0  8 0 0
2.1586785 11 0 0  9 0 1
 1.005294 10 0 0  2 0 1
 .9376874 10 0 0  3 0 1
1.3674877 10 0 0  4 0 1
1.3780087 10 0 0  5 0 1
1.1701835 10 0 0  6 0 0
1.7282214 10 0 0  7 0 0
1.7098647 10 0 0  8 1 0
1.8510748 10 0 0  9 1 0
1.1305454 14 0 0  2 0 0
  .836248 14 0 0  3 0 0
1.4673598 14 0 0  4 0 0
1.0714836 14 0 0  5 0 0
1.4459195 14 0 0  6 0 0
1.6851163 14 0 0  7 0 0
 1.686175 14 0 0  8 0 0
1.7551303 14 0 0  9 0 0
 1.565692 14 0 0  2 0 0
 2.493875 14 0 0  3 0 0
 1.822662 14 0 0  4 0 0
 2.380336 14 0 0  5 0 0
2.2171285 14 0 0  6 0 0
2.2720315 14 0 0  7 1 0
2.3537986 14 0 0  8 1 0
  2.42945 14 0 0  9 1 0
1.9180032 11 0 0  3 0 0
 .7654077 11 0 0  4 0 0
1.9781854 11 0 0  5 0 0
1.9485537 11 0 0  6 0 0
end