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


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 12:47:18 -0500

<>
John said

One difference is that x1 is entirely dependent on endogenous variables; 
so my naive question here is: which predicted values of x1 and x2 are 
included in Eq. 2 and 3 respectively (also knowing that x1 and x2 
predict each other and that x1 has no unique instruments that predict it 
directly)?

I believe that, following up on Eric's comments, the appropriate estimation can be carried out as

ivreg2 y (x1 x2 = n1 n2 q1 q2 p1 p2)
ivreg2 x1 (m1 m2 x2 = n1 n2 q1 q2 p1 p2), endog(m1 m2)
ivreg2 x2 (x1 = q1 q2 p1 p2) n1 n2
reg m1 q1 q2
reg m2 p1 p2

I include the endog option on the second eqn to determine whether m1 and m2 must be considered endogenous. Other options, such as gmm2s robust, are probably advisable.


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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