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st: RE: xtivreg instruments


From   "Steven Stillman (LMPG)" <Steven.Stillman@lmpg.dol.govt.nz>
To   "'statalist@hsphsun2.harvard.edu'" <statalist@hsphsun2.harvard.edu>
Subject   st: RE: xtivreg instruments
Date   Wed, 30 Jul 2003 12:04:24 +1200

This questions seems to come up quite often.  In fact, there is a related
FAQ at http://www.stata.com/support/faqs/stat/ivreg.html.  The bottom line
is that all excluded exogenous variables must be used as instruments for all
endogenous variables in any IV model.  In addition, even if there is a
structural relationship, one endogenous variable can never be used as an
instrument for another.  This can be clearly seen if you take your
underlying structural model and rewrite it as a reduced-form model with only
exogenous variables as independent variables.   The only exception to this
is when you have a recursive or triangular system (the FAQ explains this in
more detail), but this does not sound like your situation.

Steve  


> -----Original Message-----
> From:	Felipe Targa [SMTP:ftarga@wam.umd.edu]
> Sent:	Wednesday, July 30, 2003 2:58 AM
> To:	statalist@hsphsun2.harvard.edu
> Subject:	st: xtivreg instruments
> 
> I am estimating a GLS random-effects for panel data using the xtivreg
> STATA command. I have two endogenous variables. However, in my
> specification these two endogenous variables are affected by a different
> set of exogenous variables.  STATA takes the exogenous variables affecting
> the first endogenous variable as regressors for the second endogenous
> variable. I would like to know what I can do to restrict the estimation of
> the first endogenous variable with ONLY the exogenous variables specified
> in the command (one of them is the other endogenous variable).
> 
> Thank you,
> 
> Felipe Targa
> 
> 
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