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From |
Kit Baum <baum@bc.edu> |

To |
statalist@hsphsun2.harvard.edu |

Subject |
st: re: How to correct standard errors of a 2sls performed by |

Date |
Sat, 6 Feb 2010 08:47:35 -0500 |

<> John writes how does one do single-equation estimation with in the context of a non-recursive system. Again, here is the example: Eq1: y = x1 + x2 + z Eq2: x1 = m1 + m2 + x2 + z Eq3: x2 = n1 + n2 + x1 + z Eq4: m1 = q1 + q2 + z Eq5: m2 = p1 + p2 + z The predicted value of x2 enters in Eq. 2; however, the predicted value of x1 enters in Eq. 3. So, how does one go about estimating this non-recursive model using a single-equation estimator? In the textbook example used to motivate 2SLS, we write down a demand equation and a supply equation, both of which contain Q and P along with demand shifters and supply shifters. How is that different from eq2-3? Q = b0 + b1 P + b2 Y + e P = g0 + g1 Q + g2 R + g3 T + v with Y=income, R=rainfall, T=temperature. Those who developed IV / 2SLS were able to consistently estimate these equations by limited-information (single-equation) before systems estimators were devised. For that matter LIML could be used to estimate these equations as well (in either -ivregress- or -ivreg2- from SSC). 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 * * 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**:**Re: st: re: How to correct standard errors of a 2sls performed by***From:*John Antonakis <john.antonakis@unil.ch>

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