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From |
"Gregory Dybalski" <DybalskiG@gao.gov> |

To |
<statalist@hsphsun2.harvard.edu> |

Subject |
st: Is there a way to use ivreg2 without running the first stage |

Date |
Wed, 24 Nov 2004 14:35:14 -0500 |

Prof. Mark E. Schaffer, Again, I appreciate your assistance. I'm sorry if my prior submission was unclear. The fitted values, fittedt1 & fittedt2, are obtained from the regression of the endogenous regressor on the included and excluded variables. To obtain these estimates I use, xtreg y1 x1 x2 z1 z2, fe The predicted values from this regression are then interacted with the year dummy variables to obtain the variables fittedt1 and fittedt2. A similar interaction is done for the y1 variables to obtain y1_t1 y1_t2. These values are used in the instrumental variable estimation. ivreg2 y x1 x2 (y1_t1 y1_t2 = fittedt1 fittedt2) Sincerely, Greg Dybalski >Greg, > >Date sent: Wed, 24 Nov 2004 10:31:59 -0500 >From: "Gregory Dybalski" <DybalskiG@gao.gov> >To: <statalist@hsphsun2.harvard.edu> >Subject: st: Is there a way to use ivreg2 without running the first stage > regression? >Send reply to: statalist@hsphsun2.harvard.edu > >> Prof. Mark E. Schaffer, >> >> I appreciate your reply, it was quite helpful. Your method should >> work. >> >> I have an similar alternative method that I would like you to comment >> on. I referred to the archaic '2SLS' method because I am switching from >> Limdep (ver 8), which, in fact, forces the user to perform IV estimation >> in two steps. I originally estimated the model in Limdep because it had >> a procedure to estimate a fixed effects model using IV that corrects for >> autocorrelation. Your recent changes to the ivreg2 procedure now >> provide for such estimation. >> >> Background >> >> You correctly stated the basic model that I want to estimate using >> Stata, >> ivreg2 y x1 x2 (y1=z1 z2) >> >> I have 17 years of data for each group and want to examine if the >> coefficient for the y1 variable is different for earlier years than the >> later years. To estimate this revised model in Limdep I created 4 >> variables: y1_t1 & y1_t2 (the interaction between y1 and the dummy >> variable for the time periods) and fittedt1 & fittedt2 (the interaction >> between the estimated 1st stage values and the dummy variable for the >> time periods). I used Limdep regression command with 2 endogenous >> regressors and their fitted values. >> >> To estimate this model in Stata you suggested that I create additional >> variables by interacting the y1 and the excluded instruments with a >> dummy variable. Your method interacts the excluded instruments with the >> dummy variable but does not interact the included exogenous variables, >> x1 & x2, with the dummy. Your method & mine will not result in the same >> estimated values, but I am not sure that it matters. > >It's entirely up to you. If you think that the coefficients on x1 >and x2 may also have changed, then you can also interact these with >the time dummy, then test etc. Or if you want to maintain the >assumed constancy of these coefficients, then don't interact. > >> Proposed Alternative Method >> >> I have an alternative method that I would like you to comment on. What >> happens if I substitute the '1st stage' fitted values for the excluded >> exogenous variables in the ivreg2 command instead of the z1 and z2 >> variables? The ivreg2 command would then become, >> ivreg2 y x1 x2 (y1_t1 y1_t2 = fittedt1 fittedt2) > >I don't understand what fittedt1 and fittedt2 are. You call them the >first stage fitted values for the the excluded IVs, but excluded >exogenous variables never get "fitted" when you do 2SLS - what would >you regress z1 and z2 on? > >--Mark > >> This method should also provide suitable estimates. >> >> I have reviewed some of the past postings to the Stata list and found >> this method proposed when the endogenous regression was based on a >> probit model. I assume that your proposed method and this alternative >> would result in suitable estimates. Is there any reason to prefer one >> method over another. For example, using your method would provide >> meaningful output for the test statistics regarding the overidenfying >> restrictions. >> >> Greg Dybalski >> >> >Gregory, >> > >> >I'm not quite sure I understand what you're asking for. >> > >> >ivreg2 does standard IV. Internally, there is only one stage, which >> >I suppose is standard for packages these days - "2SLS" is a somewhat >> >archaic term and it isn't common to do IV in two steps any more. >> > >> >In any case, if it's standard IV that you want to do, you should be >> >able to write down a model that can be estimate in one stage; if you >> >can't, then it isn't IV. >> > >> >In your case, say for example you have two periods. You have one >> >endogenous variable and a set of excluded instruments that I suppose >> >are also time-varying. You want to know if the coeff on the endog >> >regressor changes over time. What's wrong with the following? >> > >> >- say the equation in the original form has 3 regressors, one of >> >which is endogenous, and 2 excluded instruments: >> > >> >ivreg2 y x1 x2 (y1=z1 z2) >> > >> >- Interact your endog regressor y1 with time so that you have two >> >such regressors, y1_t1 and y1_t2 >> > >> >- Interact your excluded instruments with time to get four such IVs, >> >z1_t1 z1_t2 z2_t1 z2_t2 >> > >> >- Estimate >> > >> >ivreg2 y x1 x2 (y1_t1 y1_t2 = z1_t1 z1_t2 z2_t1 z2_t2) >> > >> >and test the equality of the coefficients on y1_t1 and y1_t2. >> > >> >Probably there's something wrong with this, but a specific example >> >might help to clarify the question. >> > >> >--Mark >> > >> >Date sent: Tue, 23 Nov 2004 11:14:53 -0500 >> >From: "Gregory Dybalski" <DybalskiG@gao.gov> >> >To: <statalist@hsphsun2.harvard.edu> >> >Subject: st: Is there a way to use ivreg2 without running >> the first stage >> > regression? >> >Send reply to: statalist@hsphsun2.harvard.edu >> > >> >> Hi, >> >> >> >> I am estimating an instrumental variable model having one >> endogenous >> >> variable on the right hand side (RHS) of the equation. The model >> is >> >> estimated from panel data, having fixed effects, and correcting for >> >> autocorrelation; heteroscedasicity does not appear to be much of a >> >> problem. >> >> >> >> Now, I want to re-examine the model where the coefficient for the >> RHS >> >> endogenous variable varies over several time periods. The simplest >> way >> >> to do this would be to take the fitted values from the first-stage >> and >> >> generate the needed instruments. For example, the values for the >> >> instrument in the initial time period would be equal to the >> original >> >> fitted values and zero for the other time periods. The remaining >> >> instruments would be generated similarly. What I want to do is use >> >> ivreg2 without running the '1st stage regression'. So, is there a >> way >> >> where I can enter the actual and fitted values for the RHS >> endogenous >> >> variable into ivreg2? Or is there another Stata procedure that >> could >> >> estimate the model having these above features. >> >> >> >> Obviously, I can estimate the model with the fitted values using a >> >> regression procedure, and the model coefficients would be properly >> >> estimated, but the variances would not be. >> >> >> >> Greg >> >> >> >> >> >> * >> >> * For searches and help try: >> >> * http://www.stata.com/support/faqs/res/findit.html >> >> * http://www.stata.com/support/statalist/faq >> >> * http://www.ats.ucla.edu/stat/stata/ >> > >> >Prof. Mark E. Schaffer >> >Director >> >Centre for Economic Reform and Transformation >> >Department of Economics >> >School of Management & Languages >> >Heriot-Watt University, Edinburgh EH14 4AS UK >> >44-131-451-3494 direct >> >44-131-451-3008 fax >> >44-131-451-3485 CERT administrator >> >http://www.som.hw.ac.uk/cert >> > >> >> * >> * For searches and help try: >> * http://www.stata.com/support/faqs/res/findit.html >> * http://www.stata.com/support/statalist/faq >> * http://www.ats.ucla.edu/stat/stata/ > >Prof. Mark E. Schaffer >Director >Centre for Economic Reform and Transformation >Department of Economics >School of Management & Languages >Heriot-Watt University, Edinburgh EH14 4AS UK >44-131-451-3494 direct >44-131-451-3008 fax >44-131-451-3485 CERT administrator >http://www.som.hw.ac.uk/cert > * * For searches and help try: * http://www.stata.com/support/faqs/res/findit.html * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

**Follow-Ups**:**Re: st: Is there a way to use ivreg2 without running the first stage***From:*Mark Schaffer <M.E.Schaffer@hw.ac.uk>

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