Tina,
> Dear Statalisters,
>
> If the theoretically correct functional form of my endogenous variable
> calls for its squared term also I in fact have two endogenous
> variables, e.g.
>
> y= + a1x1 + a2x1^2 + other exogenous vairables + e
>
> My question is: If I want to report the first stage estimations of
> this model. Should all instruments be used
> in the regression predicting x1 and again in x2? That is, should there
> be two first stages, with different dependent variable (x1 and x1^2) but
> the same regressors?
In a word, yes. IV is a single-equation estimation method, and all the
endogenous regressors are projected on all the instruments.
Cheers,
Mark
> Tinna
>
> *
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>
Prof. Mark Schaffer
Director, CERT
Department of Economics
School of Management & Languages
Heriot-Watt University, Edinburgh EH14 4AS
tel +44-131-451-3494 / fax +44-131-451-3294
email: [email protected]
web: http://www.sml.hw.ac.uk/ecomes
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