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help for checkreg3
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Check identification status of simultaneous equations system

        checkreg3 (depvar1 varlist1) (depvar2 varlist2) ... (depvarN
                 varlistN)


Description

    The conventional order condition (necessary, not sufficient) pertaining
    to single-equation estimation with instrumental variables is satisfied by
    counting included endogenous and excluded exogenous variables in the
    equation. The sufficient rank condition pertains to the rank of the
    matrix of instruments (see Baum, Schaffer, Stillman (2007)). In a
    full-information systems estimation context, such as that performed for
    simultaneous linear systems by reg3, it is possible that each equation
    satisfies the single-equation order and rank conditions for
    identification, yet the system is unidentified. Identifiability in this
    context refers to the unique relationship between the matrices of
    structural coefficients and the reduced form of the linear system. If the
    system is to be identified, you must be able to derive unique values of
    the structural coefficients from those of the reduced form. For a
    discussion of this issue in a simultaneous equations context, see Greene
    (2003, pp. 389-394) and Wooldridge (2002, p. 218).

    At present, Stata's reg3 command does not check to see that the
    conditions for identification of a structural system are satisfied, and
    produces estimation results as long as the single-equation order and rank
    conditions are satisfied for each equation unless the ireg3 option is
    used. The iterations triggered by that option will not converge if the
    rank condition is violated. The checkreg3 command allows you to verify
    that these results are meaningful by checking to see that the rank
    condition is satisfied for each of the N equations in the system. Unless
    the rank condition is satisfied for each equation in the system, the
    system is unidentified. Although it is unusual for a system to satisfy
    the order condition without satisfying the rank condition, it can occur.

    To use checkreg3, merely take your reg3 command, change the command name
    to checkreg3 and remove any options. The values of 0.5, -0.5 are used
    only as placeholders to check the identification status.

Examples

    . webuse auto

    . checkreg3 (price mpg turn headroom weight) (mpg price headroom) (turn
        headroom trunk weight)

    . checkreg3 (price mpg turn headroom weight trunk) (mpg price headroom)
        (turn headroom trunk weight)

    . checkreg3 (price mpg turn headroom) (mpg price) (turn headroom trunk
        weight length)

    . checkreg3 (price mpg turn weight ) (mpg price headroom) (turn mpg
        headroom trunk )

Citation of checkreg3

checkreg3 is not an official Stata command. It is a free contribution to the
research community, like a paper. Please cite it as such:

    Baum, C.F., 2007.  checkreg3: Stata module to check identification status
        of simultaneous equations system.
        http://ideas.repec.org/c/boc/bocode/s456877.html

Acknowledgements

    I am grateful to Thomas Cornelissen for raising this issue on Statalist
        and pointing out the relevant literature, and to David Drukker for
        pointing out flaws in the methodology used in an earlier version of
        the routine.  The routine makes use of Ben Jann's mm_which() function
        from his moremata package, for which I am grateful.

Authors

    Christopher F. Baum, Boston College, USA
    baum@bc.edu

References

Baum, C. F., Schaffer, M. E., Stillman, S., 2007. Enhanced routines for
    instrumental variables/GMM estimation and testing.  Boston College
    Department of Economics Working Paper No. 667.
    http://fmwww.bc.edu/ec-p/WP667.pdf

Greene, W. 2003. Econometric Analysis. 5th ed.  Upper Saddle River, NJ:
    Prentice Hall.

Wooldridge, J.M. 2002. Econometric Analysis of Cross Section and Panel Data.
    Cambridge, MA: MIT Press.

Also see

    Online: reg3