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st: re: 2sls and sample size


From   Kit Baum <baum@bc.edu>
To   statalist@hsphsun2.harvard.edu
Subject   st: re: 2sls and sample size
Date   Tue, 2 Dec 2008 22:49:00 -0500

< >
Carola said

I have read that while two-stage least squares and other instrumental variables estimators are consistent, they are not unbiased in small samples. I wonder how large should the sample be in order to safely use two-stages least squares/instrumental variable estimation. Is there a cutoff N?


As any textbook treatment of IV will demonstrate, IV estimators are biased at any sample size that you are likely to encounter in empirical work. The amount of the bias may become negligible, but it is there. You could evaluate the degree of bias with Monte Carlo readily enough.

Kit Baum, Boston College Economics and DIW Berlin
http://ideas.repec.org/e/pba1.html
An Introduction to Modern Econometrics Using Stata:
http://www.stata-press.com/books/imeus.html


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