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re: st: xtivreg2- dropping instrumnets form the instrument matrix


From   Christopher Baum <kit.baum@bc.edu>
To   "statalist@hsphsun2.harvard.edu" <statalist@hsphsun2.harvard.edu>
Subject   re: st: xtivreg2- dropping instrumnets form the instrument matrix
Date   Mon, 31 Oct 2011 14:51:42 -0400

<>
I want to exclude some instruments (that is all exogenous explanatory variables in my model) from the instrument matrix in the xtivreg2 estimator.

e.g. 
xtivreg2 Price  (  Crop= LogTemp) year GDP, fe first robust

here the first step regression includes the variable year and GDP
I want to suppress this.
Is this possible?

I want to isolate the effect of temperature on the country's crop yield and hence on the price.


No, it is not possible nor desirable, from either econometric or economic grounds. The IV estimator requires that you include all exogenous variables in the Z matrix, including those already in the equation's X matrix. See the Baum-Schaffer-Stillman papers in Stata Journal 2003, 2007. 



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