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st: 2SLS with nonlinear exogenous variables


From   "Shaw, Jim (NIH/NCI)" <shawjim@mail.nih.gov>
To   "Statalist (E-mail)" <statalist@hsphsun2.harvard.edu>
Subject   st: 2SLS with nonlinear exogenous variables
Date   Thu, 17 Jul 2003 20:43:29 -0400

Dear Statalist:

Is 2SLS (as implemented by ivreg) still efficient if dummy variables or
polynomials are included as exogenous variables/instruments?  For example,
would 2SLS be efficient if applied to the following system of equations:

y1 = y2 + x1 + x1^2 + x2 + e1

y2 = y1 + X1 + x3 + x4 + e2

where y1, y2, and x1-x3 are continuous variables, and x4 is a binary
variable.  I believe that 2SLS would yield consistent estimates in the above
scenario.  However, if not efficient, then what method (Stata command) would
one want to use?  I am dealing with repeated measures on subjects (i.e., my
data are clustered), so I would want to use a command that could address
this concern.  Thanks.

--
James Shaw
Research Associate
College of Pharmacy
The University of Arizona
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