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Re: st: Interactions with instrumental variables


From   Mark Schaffer <M.E.Schaffer@hw.ac.uk>
To   statalist@hsphsun2.harvard.edu, Jennifer Alix <alix@are.berkeley.edu>
Subject   Re: st: Interactions with instrumental variables
Date   Sun, 30 Mar 2003 23:37:11 +0100 (BST)

Jennifer,

Quoting Jennifer Alix <alix@are.berkeley.edu>:

> Hello,
> 
> Does anyone have a program that allows one to interact an
> instrumented
> variable with other variables in a regression equation AND
> calculates the
> correct standard errors for this?  Example:
> 
> y = b1x1+b2x2+b3x1*x2
> I want to instrument x2 with some z's to get:
> y = b1x1+b2x2hat+b3x1*x2hat
> 
> It seems to me that this should be out there somewhere...

I'm not aware of any such program out there.  It's not hard, though, to 
interact x1 with the z's to generate instruments that correspond to the 
x1*x2 term.  That said, one needs to be a bit careful here - see the 
Davidson and MacKinnon (1993) book, p. 226 and the references therein.

Hope this helps.

--Mark

> 
> Thanks,
> Jennifer
> 
> 
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> 



Prof. Mark Schaffer
Director, CERT
Department of Economics
School of Management & Languages
Heriot-Watt University, Edinburgh EH14 4AS
tel +44-131-451-3494 / fax +44-131-451-3008
email: m.e.schaffer@hw.ac.uk
web: http://www.sml.hw.ac.uk/ecomes
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