Kris,
Your questions are common ones that come up on the list from time to
time; see below.
> -----Original Message-----
> From: [email protected]
> [mailto:[email protected]] On Behalf Of
> Kristopher Dawsey
> Sent: 30 May 2006 22:25
> To: [email protected]
> Subject: st: simple question on 2SLS??
>
> Hello all,
> I'm a beginner at Stata, and not much of a pro in
> econometrics either. I am trying to reproduce the results of
> a paper on FDI and economic growth. They have the following
> structural equation,
>
> growth = a + b*FDI + c*FDI*education + d*other_things ... + error
>
> where FDI is thought to be endogenous. So you can see that
> the endogenous variable is interacted with an exogenous
> variable in the structural equation. My question is how to
> force Stata to do this with ivreg? I could not figure out
> how to get this idea into the command line.
You have to create your own instruments for the FDI*education variable.
The natural thing to do is to interact education with the excluded
instruments. See e.g.
http://www.stata.com/statalist/archive/2004-08/msg00780.html
> Another question is that ivreg seems to automatically use all
> exogenous variables in the first stage, how can i force it to
> use only the instruments I specify?
You *don't* want to do this. There is a Stata FAQ on it plus regular
postings to Statalist, e.g.
http://www.stata.com/statalist/archive/2005-11/msg00123.html
Cheers,
Mark
Prof. Mark Schaffer
Director, CERT
Department of Economics
School of Management & Languages
Heriot-Watt University, Edinburgh EH14 4AS
tel +44-131-451-3494 / fax +44-131-451-3296
email: [email protected]
web: http://www.sml.hw.ac.uk/ecomes
> I realize that I can get around these problems doing the
> regression manually, but I don't want to have to deal with
> correcting the standard errors (I'm not sure how to do that
> correctly).
>
> However, if I was to do that, I found the formula (2SLS
> variance)/(SSTx*R^2x,z) in Wooldridge, but there isn't much
> explanation. Exactly what regression is SSTx coming from?
> Is R^2x,z just R^2 from the first stage? Is the denominator
> a constant or is it changing with each xi?
>
> Thanks very much, I appreciate any help. -Kris
>
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>
>
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