193 IV15b Hausmann test in R

This video demonstrates how to formally test the difference between Ordinary Least Squares (OLS) and Instrumental Variables (IV) estimation using the Hausman test. We analyze the card dataset to see a scenario where both methods yield similar results, indicating OLS may be sufficient. The discussion covers interpreting the weak instrument, Hausman, and Sargan tests, emphasizing the importance of p-values for statistical significance. Ultimately, we conclude that when the Hausman test fails to reject the null hypothesis and instruments are strong, OLS is preferred for its efficiency. Visit AxiomTutoring.com and subscribe to @AxiomTutoringCourses.