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Re: st: 2sls robust or 3sls?


From   John Antonakis <john.antonakis@unil.ch>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: 2sls robust or 3sls?
Date   Sun, 27 Sep 2009 15:21:06 +0200

Hi Andres:

If 3SLS and 2SLS estimates are significantly different (you can test this with a Hausman test), then you should go with 2SLS because if there is a mispecification in one part of the model 2SLS will not taint estimates in other parts of the model (whereas with 3SLS bias is transmitted everywhere). See p. 282 of
Baltagi, B. H. (2002). Econometrics. New York: Springer.

Best,
J.

____________________________________________________

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University of Lausanne
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On 23.09.2009 00:15, Susaeta ,Andres wrote:
Hello Stata members.

I'm dealing with a simultaneous equation system, three supply and three demand equations. As endogeneity is present, a instrumental variable method is required. I have 37 years of historical data.

- I'm in doubt to use 2sls (robust) or 3sls. I know that 3sls is more efficient than 2sls but because of the small number of observations it might not be good idea.

- 3sls doesnt allow the option robust. Is there any way to do so?

- when I use reg3 for the whole system together, the results are different if you I it equation by equation. Anyone know the reason or which way is more reasonable?

Thanks
Andres




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