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st: query on handling unobserved fixed and endogeneity for system of equations
My query is similar to the one that Mark and Rodrigo
contributed in an query by Marijke. However, in my
case I have sufficient instruments to form the system
which goes like:
1. Yit = X1it + X2it + X3it + CONTROLit + ut + e1it
2. X1it = X2it + X3it + Z1it + ut + e2it
3. X2it = X1it + X3it + Z2it + ut + e3it
4. X3it = X1it + X2it + Z3it + ut + e4it
I want to address both unobserved individual effect
and endogeneity issue simultaneously. 'xtivre2, fe'
was the option that I used in addressing the above
systems piece by piece, i.e.
1. xtivreg2 Y X1 CONTROL (X1 X2 X3 Z1), fe
2. xtivreg2 Y X2 CONTROL (X2 X1 X3 Z2), fe
3. xtivreg2 Y X3 CONTROL (X3 X1 X2 Z3), fe
As Mark pointed out that this way of solving things
still suffers from endogeneity due to omitted
Much appreciate to have your comments/understanding on
this procedure and any other model/s that may validly
recommend to address this issue.
Thank you in advance for any of your suggestions or
Dept. of Accounting and Finance,
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