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Re: st: Using ivregress when the endogenous variable is used in an interaction term in the main regression


From   Nick Kohn <coffeemug.nick@gmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: Using ivregress when the endogenous variable is used in an interaction term in the main regression
Date   Wed, 21 Dec 2011 12:43:23 +0100

Thanks for the reply.

My simplified model is (X2 is endogenous):
Y = b*X1*X2 + controls

In regards to the third option you suggest, would I do the following?

 1) First stage regression to get X2hat using the instrument Z
 2) Run the first stage again but use X1*X2hat as the instrument for
X1*X2 (so Z is no longer used)
 3) Run the second stage using (X1*X2)hat (so the whole product is
fitted from step 2))

On Wed, Dec 21, 2011 at 12:24 PM, Tirthankar Chakravarty
<tirthankar.chakravarty@gmail.com> wrote:
> You can see my previous reply to a similar question here:
> http://www.stata.com/statalist/archive/2011-08/msg01496.html
>
> T
>
> On Wed, Dec 21, 2011 at 2:24 AM, Nick Kohn <coffeemug.nick@gmail.com> wrote:
>> Hi,
>>
>> I have a specification in which the endogenous variable is interacted
>> with an exogenous variable. Since I cannot multiply the variables
>> directly in the regression, I create a new variable. In ivregress it
>> makes no sense to use the entire interaction term as the endogenous
>> variable.
>>
>> I can do the first stage manually (and then use the fitted value in
>> the main regression), however, from what I remember the standard
>> errors will be wrong when doing it manually.
>>
>> Is there a way to overcome this?
>>
>> Thanks
>> *
>> *   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/
>
>
>
> --
> Tirthankar Chakravarty
> tchakravarty@ucsd.edu
> tirthankar.chakravarty@gmail.com
>
> *
> *   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/

*
*   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/


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