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st: question about sureg

From   Kit Baum <>
Subject   st: question about sureg
Date   Sun, 13 May 2007 14:44:41 -0400

sacrificial emu

Nuno said

I would like to run the following system of unrelated equations using
-sureg-, but I don't know if the command is able to do this:


Does anyone have an idea of how to set the -sureg- command in order to
estimate this system of equations?

No, because is not a system of SURs, in which each regressor is exogenous. It is a simultaneous system, in fact a recursive simultaneous system, but without additional identifying restrictions you cannot estimate it as such. The first equation can be estimated with OLS (assuming that x1, x2 are appropriately exogenous w.r.t. u) but for the second equation, you need to use an instrumental variables estimator, and all of the exogenous variables in this system are already in the equation as regressors. Thus without some additional instruments you're out of luck.

Kit Baum, Boston College Economics and DIW Berlin
An Introduction to Modern Econometrics Using Stata:

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