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st: Odd change in R^2 with IV regression
I have run into an odd situation when using ivreg2. Upon adding a
particular variable (X) to a regression model as an included instrument
(i.e., exogenous regressor), both the centered and uncentered R^2 decline.
The variable X is significantly related to the outcome Y in the model. When
I estimate the same model using 2SLS, the R^2 also declines when X is added
as an exogenous variable. However, the centered R^2 is much greater in
magnitude than when GMM is used. Any thoughts as to why this might be
occurring? Is it something I should be worried about? Are the R^2
statistics reported by ivreg2 valid in such a situation? If not, what
should I report?
James W. Shaw
College of Pharmacy
The University of Arizona
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