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re: st: Endogenous Regressors Predicted by the Same IV

 From Kit Baum To statalist@hsphsun2.harvard.edu Subject re: st: Endogenous Regressors Predicted by the Same IV Date Mon, 1 Mar 2010 11:01:31 -0500

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Iâ€™m pretty sure that what weâ€™re trying to do is mathematically estimable under certain assumptions.  So, we are trying to figure out the syntax for the estimating procedure.  And, then weâ€™d like to clarify the assumptions that have to hold for us to accept the estimates.

We are ultimately trying to estimate a dep var we will call Y_dep.  Y_dep is being predicted by X_1, X_2, â€¦X_10.  But, X_1, X_2, and X_3 are all endogenous.  We believe they can all be predicted by the same instrumental variable, Z_1.  And, furthermore, we are willing to accept that Z_1 has no direct effect on Y_dep beyond its effects through X_1, X_2, and X_3.

No can do. This is a textbook case of under(un)identification. You need at least three Z variables to identify the equation, whether or not the estimation technique is OLS, probit, etc.

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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