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


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:
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