* Labour Supply Model
*
* Keywords:
* regression, 2sls, labour, supply, iv, wu
*
* Description:
* We illustrate how to examine endogeneity of a variable in Labour Supply
* Model by using Wu test
*
* Author(s):
* Noel Roy
* Skif Pankov
*
* Source:
* William H. Greene, Econometric Analysis - 7th Edition
* Pearson International Edition, Chapter 8, Example 8.6 (page 276)
*
* Reading the datafile and retrieving variables' names
read (TableF8-1.shd) / names
* Running an OLS regression of wks on lwage, ed, union and fem
ols wks lwage ed union fem
* Specifying the list of exogenous variables in the demand-supply model as
* z1 = [constant,ind ed union fem] and running a 2SLS regression
inst wks lwage ed union fem (ind ed union fem) / dn
* Adding smsa to the list of exogenous variables z2
inst wks lwage ed union fem (ind ed union fem smsa)/dn
* Testing whether lwage is exogenous using the Wu specification test:
* Getting the predicted values in a regression of lnwage on the first set
* of instrumental variables z1.
?ols lwage ind ed union fem / predict=lwghat
* Running an OLS regression of wks on independent variables and lwghat
ols wks lwage ed union fem lwghat
*
* Testing the null hypothesis that the coefficient of lwghat is zero.
test lwghat
stop