Statalist


[Date Prev][Date Next][Thread Prev][Thread Next][Date Index][Thread Index]

st: Economic Intuition of IV estimates


From   Erasmo Giambona <e.giambona@gmail.com>
To   statalist <statalist@hsphsun2.harvard.edu>
Subject   st: Economic Intuition of IV estimates
Date   Fri, 12 Feb 2010 12:03:30 +0100

Dear Statalist,

I am trying to gain more economic intuition on IV estimation. I am
estimating the following model using a panel dataset of firm-year
observations:

Leverage Ratio = a + b*Tangible Assets+e.

Suppose Tangible Assets is endogenous. My instrument is a proxy for
Demand of Tangible Assets (Instrument1). Question 1) If I estimate the
model using 2SLS, how do I interpret "b"? In particular, is it
possible to state that "b" tells me how Demand of Tangible Assets
affects the leverage ratio? Question 2) Suppose I have an additional
instrument (e.g., Firm Age - Instrument 2) and let's assume this in
unrelated to Leverage Ratio. If I estimate the model again using both
Instruments, it seems that "b" does not tell me anymore ONLY how
Demand of Tangible Assets affects the leverage ratio. Is my
interpretation correct?

Any thoughts on the issue is highly appreciated,

Erasmo
*
*   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/



© Copyright 1996–2014 StataCorp LP   |   Terms of use   |   Privacy   |   Contact us   |   What's new   |   Site index