Re: st: Question about 3SLS with inequality constraints

[Christopher Baum <kit.baum@bc.edu>]

<>
On Nov 20, 2010, at 2:33 AM,Mayumi wrote:

> I need to estimate the following three stage least squares:
> 
> lnX1=a0+a1*lnX2+a2*lnY
> lnX2=b0+b1*lnX1+b2*lnY
> 
> Y is exogeneous variable.
> 
> I have to impose the following constraint:
> 
> a1>b1
> 
> Is there any built-in procedure to conduct the above 3SLS with inequality
> constraint?
> 
> If not, would anyone pls guide me any possible way to conduct the above
> estimation?

No. There is no way to estimate either of the equations in this system, period. Neither of the equations are identified. For each equation, you must have at least one exogenous variable that does not appear in the equation for use as an instrument. If you try estimating either equation with single-equation methods (such as ivregress 2sls) this should be clear.

Kit

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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