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st: ivreg question


From   "Nick Cox" <n.j.cox@durham.ac.uk>
To   <statalist@hsphsun2.harvard.edu>
Subject   st: ivreg question
Date   Tue, 20 Sep 2005 17:26:32 +0100

The posting below is forwarded on before of Naisargik Lenka. 

Nick 
n.j.cox@durham.ac.uk 

I have a small doubt regarding ivreg.

I have two equation model which I want to estimate using ivreg.

Equation1: insider ownership=f(market value of equity, corporate 
value, other control exogenous vars)
Equation2: corporate value=g(insider ownership, other control 
exogenous vars)

Assuming non-linear ownership effects, I want to make spline of 
insider ownership say ins1,ins2,ins3 and I want to use these three in 
2sls.

What should I do?

Should I first estimate insider ownership using all exogenous and 
instrumental variables and then make spline and use these in the 
second stage where I modeled corporate value=f(ins1,ins2,ins3)

Or 

Should I estimate all ins1,ins2,ins3 separately using exogenous and 
instrumental variable and then use these in my second stage of 
estimation of corporate value.

Please help me.

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