How do you test for endogenous regressors,or correlation between the error term and any regressor in a random effects model?
A)estimate coefficients with RE and FE,then perform a Hausman test of equality
B)estimate the model capturing estimated residuals,then regress residuals on all regressors and perform an F-test
C)estimate RE model capturing estimated residuals,then estimate coefficients of correlation with each regressor
D)estimate RE and FE models and perform an F test on each model individually.If the difference between the F statistics is significant,conclude endogeneity.

Question

Quizplus · Accepted Answer

The Hausman test is used to test for the presence of endogenous regressors in panel data models by comparing the coefficients of the Random Effects (RE) model and the Fixed Effects (FE) model. If the difference in coefficients is statistically significant, it suggests that the regressors are correlated with the error term, indicating endogeneity.

How Do You Test for Endogenous Regressors,or Correlation Between the Error