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The Stata Journal
Volume 3 Number 1: pp. 1-31

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Instrumental variables and GMM: Estimation and testing

Christopher F. Baum
Boston College
Mark E. Schaffer
Heriot–Watt University
Steven Stillman
New Zealand Department of Labour
Abstract.   We discuss instrumental variables (IV) estimation in the broader context of the generalized method of moments (GMM), and describe an extended IV estimation routine that provides GMM estimates as well as additional diagnostic tests. Stand-alone test procedures for heteroskedasticity, overidentification, and endogeneity in the IV context are also described.
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