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st: re: Re: Suppressing the Constant in the First Stage with ivreg2


From   Kit Baum <baum@bc.edu>
To   statalist@hsphsun2.harvard.edu
Subject   st: re: Re: Suppressing the Constant in the First Stage with ivreg2
Date   Thu, 18 Jun 2009 11:06:45 -0400

<>	
Anson said

Thank you for the response.  You are exactly right about include a
vector of ones and specifying noc, it will be included.  Is there a
way to force ivereg2 not to include an exogenous var (ie iota) in the
FSRs?   All I can say is the model is structural, and there is a heavy
theoretical justification for suppressing the constant in the first
stage.



As I understand it there is no justification in terms of econometric theory for suppressing the constant in the FSR if a constant appears in the structural equation to be estimated. The specification of FSRs is driven by your desire to use an estimator which produces consistent estimates of the structural equation when OLS does not. If you use that IV estimator, you must play by the rules. The Z matrix contains all instruments, included and excluded, in the model. If you include iota in the model, it must appear in the Z matrix, and will then be used in the IV formula.

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



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