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Re: st: Question about ivreg -- HELP ME OUT


From   Mark Schaffer <M.E.Schaffer@hw.ac.uk>
To   statalist@hsphsun2.harvard.edu, Frank Zhang <zhangmailer@yahoo.com>
Subject   Re: st: Question about ivreg -- HELP ME OUT
Date   Sun, 20 Jun 2004 19:45:16 +0100 (BST)

Frank,

Quoting Frank Zhang <zhangmailer@yahoo.com>:

> Dear STATALISTERS, 
> 
> I have 2 questions about the working of inreg and
> 2SLS. It may seem basic to you, but I really need
> clarification on that. 
> 
> Here is the code: 
> 
> use http://fmwww.bc.edu/ec-p/data/wooldridge/MROZ
> ivreg lwage (educ = fatheduc )  * 1st command
> reg lwage educ (educ fatheduc)  * 2nd command
> 
> Question1: why the 1st and 2nd commands give different
> answers since they are both regression with
> instruments?

It's because you're using the old and not entirely intuitive reg syntax 
incorrectly.  Because educ is in the instrument list, it's treated as 
exogenous.  To get the same results, use the following:

regress lwage educ (fatheduc)

> 
> reg educ fatheduc
> predict educpred
> reg lwage educpred             * 3rd command
> 
> Question 2: why the 3rd command gives answers
> different than those from either 1st command or 2nd
> command since regression with instruments is
> essentially 2SLS?

Because the samples are different.  Your first stage is based on 753 obs, 
your second is based on 428.  Limit the first stage to the same 428 obs 
and you'll get the same results as ivreg.

Shameless self-promotion: check out ivreg2.

Cheers,
Mark

> 
> Thank you very much for clarification!
> 
> 
> 
> 		
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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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