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st: two stage model variance estimators
Dear statalisters *
I am confronting a problem much like that described by James Hardin in volume 2, issue 3 of the Stata Journal, "The robust variance estimator for two-stage models," where he gave an illustration of Stata code to construct the Murphy-Topel variance estimator.
I am using a variable (call it yhat), predicted in a first (series of) equations, as a regressor in my second equation.
In other words, my first (series of) regressions looked like this:
(1) y = b1 x + b2 xsq
Then, I predicted yhat from that regression, and used that in a second regression:
(2) z = b1 yhat + b2 x2 + b2 x3*
I say "series of" regressions because I have a panel of 30 countries. Rather than run one panel data regression and predict each country's yhat from that, I ran each country as a separate regression, not wanting to assume that they could be pooled. In other words, I ran equation (1) 30 different times, for each country in the dataset. (It seemed to make sense at the time, to both me and my committee!)
Therein lies my problem. I would like to adjust the standard errors for the fact that I predicted yhat, but as I ran a different regression for each country, the solution is not as easy as constructing the Murphy-Topel estimator. Does anyone have any suggestions? Any help would be much appreciated, before I dive into something that is undoubtedly over my head. Thanks.
Assistant Professor of Economics
University of Southern Maine
11 Chamberlain Avenue
Portland, ME 04104
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