If your endog RHS var y2 is interacted with an exog RHS var x1, then
you have a "new" endog RHS var y2x1, and you may need additional
excluded instruments. Use -ivreg- as suggested.
On 3/23/06, Paolo Caruso <[email protected]> wrote:
> Thanks for your replies.
>
> The reason why I want to exclude the variables is because they are interactions (based on the variable that I am instrumenting) therefore, it can not be valid to include them in the first stage. If there is any other way of avoiding this problem then please let me know.
>
> Thank you for the commands but the actual problem I am having is if it is possible to do the same thing apart from with more than one instrumented variable and what additional commands I would have to do in order to ensure the correct t-stats are reported.
>
> Regards,
>
> Paolo
>
> >>> [email protected] 03/23/06 14:08 PM >>>
> It is worse than "not a good idea" to pick and choose among exog vars
> to include in the first stage--it is not the IV estimator, and you
> would have to derive consistency results for your new homemade
> estimator based on different assumptions. You are better off sticking
> with -ivreg- or -ivreg2- to be sure. If you want to include
> d7usq=d7unit^2 as a new endogenous RHS variable, you now have two
> endog variables, and you may need more excluded instruments--but the
> products (with exog vars) and powers of your existing excluded
> instrument(s) are candidates.
>
> On 3/23/06, Arne Risa Hole <[email protected]> wrote:
> > You can try the following code:
> <snip> This replicates:
> >
> > ivreg lw expr tenure rns smsa (iq s=med kww)
> >
> > If you want to remove some of the instruments simply drop them from
> > the first stage regressions. Note that not using all the exogenous
> > variables as instruments is probably not a good idea - see
> > http://www.stata.com/support/faqs/stat/ivreg.html.
> >
> > On 23/03/06, Paolo Caruso <[email protected]> wrote:
> > > This is a question with regards to IV's.
> > >
> > > I am using STATA in order to do a 2SLS. STATA does not allow you to specify which variables to include or not include in the first stage. This means that I have to complete the regression in the separate two stages.
> > >
> > > I know how to adjust the MSE when I have one variable that I want to instrument, however, I do not know how to do it when I have more than one.
> > >
> > > The command lines in stata to adjust the MSE for one variable are as follows:
> > <snip> ereturn display
> > >
> > > where d7unit is the variable that I want to instrument and loginc is the dependant variable.
> > >
> > > I would also like to instrument d7unit^2 and this is where I am unsure what the relevant command lines would be in order to ensure that the correct MSE is used.
> > >
> > > Any help would be much appreciated.
>
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