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st: Re: ivreg2 C-stat


From   Kit Baum <baum@bc.edu>
To   statalist@hsphsun2.harvard.edu
Subject   st: Re: ivreg2 C-stat
Date   Wed, 23 Feb 2005 08:06:05 -0500

On Feb 23, 2005, at 2:33 AM, Mark wrote:

I don't recall seeing anything, though,
about IV being less prone to weak instrument problems than (2-step) GMM.
But this literature is expanding rapidly, and maybe there's something out
there that discusses this.
Since weak instrument problems are related to poor correlations between instruments and the regressors, it would not seem that any approach will be able to overcome those weak associations between the variables. It is certainly true that standard IV (2SLS) and IV-GMM use the instruments in different ways: the 2SLS approach creates linear combinations of the instruments while the GMM approach retains their individual identities. But since correlation is a linear operator, if the equation is 'essentially unidentified' with the individual instruments, it will have the same 'essential unidentification' if those instruments are combined linearly.

Kit

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