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From |
"Nick Cox" <n.j.cox@durham.ac.uk> |

To |
<statalist@hsphsun2.harvard.edu> |

Subject |
st: RE: re: simultaneous equations |

Date |
Fri, 27 Feb 2009 15:42:46 -0000 |

With coefficients of the order of 1e8 there seems to be a massive problem with the data. Look (again?) at the data, e.g. using a scatter plot matrix. There could be a substantial outlier, or some built-in dependency, or something else. Whatever it is, it is not obvious that any model can make sense of the predictor set you are using. Nick n.j.cox@durham.ac.uk mmolina@uniroma3.it As you adviced me I tried ivregress 2sls ... and obtained: ivregress 2sls expshare b2b l1 age l4a (normscore = l11a l10), note: l10 dropped because of collinearity Instrumental variables (2SLS) regression Number of obs = 198 Wald chi2(5) = 40.30 Prob > chi2 = 0.0000 R-squared = . Root MSE = 7.9e+07 ------------------------------------------------------------------------ ------ expshare | Coef. Std. Err. z P>|z| [95% Conf. Interval] -------------+---------------------------------------------------------- ------ normscore | 4.04e+08 3.93e+08 1.03 0.304 -3.66e+08 1.18e+09 b2b | -238087.7 387449 -0.61 0.539 -997473.9 521298.5 l1 | 66040.49 14947.01 4.42 0.000 36744.89 95336.09 age | 134492.7 220864.6 0.61 0.543 -298393.9 567379.3 l4a | -95654.77 20067.76 -4.77 0.000 -134986.9 -56322.68 _cons | -1.33e+08 1.18e+08 -1.13 0.260 -3.65e+08 9.85e+07 ------------------------------------------------------------------------ ------ Instrumented: normscore Instruments: b2b l1 age l4a l11a I agree with and don't know why the constant term is dropped. I was looking for some causality link between normscore and expshare, and supossed Simultaneous Equations may help me. Kit Baum <baum@bc.edu> MMolina said I run this command: reg3 (normscore l1 b2b age l4a l11a l10) (expshare b2b l1 age normscore l4a) And obtained this results. Could you please tell me if the Std. Error found for the expshare variable may invalidate the analysis or create any robustness problem? I find it very strange, if expshare is really a fraction, that you get coefficients on the order of 10^8 on any regressor. Would you try running ivreg expshare b2b l1 age l4a (normscore = l11a l10), first and show us what you get from that regression? (you could also use ivregress 2sls ... , first if you are using Stata 10) Also, is there a good reason (given definitions of the variables) that the constant term is dropped in your first equation? This system is triangular, in that normscore can be estimated with OLS as it does not contain expshare. You may still want to estimate it with 3SLS, but something fishy is going on here. See what the single- equation estimates of your second equation reveal. * * For searches and help try: * http://www.stata.com/help.cgi?search * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

**Follow-Ups**:**st: RE: RE: re: simultaneous equations***From:*"Schaffer, Mark E" <M.E.Schaffer@hw.ac.uk>

**References**:**st: re: simultaneous equations***From:*mmolina@uniroma3.it

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