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Re: st: xtivreg:how to instrument more than one endogenous variable?


From   Mark Schaffer <M.E.Schaffer@hw.ac.uk>
To   statalist@hsphsun2.harvard.edu, Dev Vencappa <lexdvv@nottingham.ac.uk>
Subject   Re: st: xtivreg:how to instrument more than one endogenous variable?
Date   Wed, 29 Sep 2004 23:42:44 +0100 (BST)

Dev,

Two points to make here.

Quoting Dev Vencappa <lexdvv@nottingham.ac.uk>:

> >
> Stata users, I apologise if that has been posted before and would
> really be grateful to be pointed to the relevant query on statalist
> for that. Does anybody know if more than one endogenous variable can
> be instrumented within xtivreg?
> 
> I have tried (in one single line):
> 
> xtivreg TFPGTL2 outpgrowth capintgrow factgrow (npintermediate
> npcapital npconsumer=l.npintermediate l.npcapital l.npconsumer) if
> origtariffcoding==1, fe
> 
> and I am getting the message:
> no observations
> r(2000);

There's nothing wrong with the syntax.  Do you have any missing values?  
Try running a nonsense regression using the same observations, i.e.,

ivreg TFPGTL2 outpgrowth capintgrow factgrow (npintermediate npcapital 
npconsumer=l.npintermediate l.npcapital l.npconsumer) if 
origtariffcoding==1

and see what happens.

> I tried to break the command into two lines:
> 
> xtivreg TFPGTL2 outpgrowth capintgrow factgrow/*
> */(npintermediate npcapital npconsumer=l.npintermediate l.npcapital
> l.npconsumer) if origtariffcoding==1, fe
> 
> and am getting the message:
> 
> factgrow: operator invalid
> r(198)
> 
> Also, if the above were to be made to work, I wonder if it would
> actually achieve what I want to do:
> ie, instrument npintermediate with its first lag. Instrument
> npcapital with its first lag. Instrument npconsumer with its first
> lag. At the moment, the command looks to me as if the instruments
> will be used at random for the instrumented variables (or I may be
> wrong in understanding how stata works)

Actually, I think the misunderstanding is in how the method of 
instrumental variables works.  See e.g.

http://www.stata.com/statalist/archive/2002-09/msg00098.html

or Vince Wiggins' FAQ on instrumental variables on the Stata website.

Cheers,
Mark

> Any help in this greatly appreciated.
> 
> Many thanks
> Dev
> 
> 
> 
> 
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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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