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From |
Tirthankar Chakravarty <tirthankar.chakravarty@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 06:20:28 -0800 |

In that case, none of this is necessary. Just instrument for X1*X2 using Z. All standard results apply. T On Wed, Dec 21, 2011 at 6:03 AM, Nick Kohn <coffeemug.nick@gmail.com> wrote: > Hmmm I see what you mean, but I'm following the methodology of a well > cited paper that does the same thing. > > I'll be sure to discuss this limitation, but in terms of using this > model, would the 3 steps in my last message be correct? > > On Wed, Dec 21, 2011 at 2:56 PM, Tirthankar Chakravarty > <tirthankar.chakravarty@gmail.com> wrote: >> I wanted to indirectly confirm that you did have the main effect in >> the regression because even though I don't know the nature of your >> study, a hard-to-defend methodological position arises when you >> include interaction terms without including the main effect. You might >> want to take that on the authority of someone who (literally) wrote >> the book on the subject: >> >> http://www.stata.com/statalist/archive/2011-03/msg00188.html >> >> and reconsider your decision to not include the main effect. >> >> T >> >> On Wed, Dec 21, 2011 at 5:46 AM, Nick Kohn <coffeemug.nick@gmail.com> wrote: >>> My model doesn't have X2 as a separate term, so in terms of the model >>> you had it looks like: >>> Y = b*X1*X2 + controls >>> So the only place the endogenous variable comes up is the interaction term >>> >>> At the risk of being repetitive, would these be the correct steps (so >>> essentially only step 3 changes from what you said): >>> 1) regress X2 on all instruments, exogenous variables and controls >>> 2) Form interactions of X2hat with the exogenous variable X1, that is, X2hat*X1 >>> 3) ivregress instrumenting for X2*X1 using X2hat*X1. >>> >>> On Wed, Dec 21, 2011 at 1:44 PM, Tirthankar Chakravarty >>> <tirthankar.chakravarty@gmail.com> wrote: >>>> Not quite; here is the recommended procedure (I am assuming that you >>>> have the main effect of the endogenous variable in there as in Y = >>>> a*X2 + b*X1*X2 + controls): >>>> >>>> 1) -regress- X2 on _all_ instruments (included exogenous controls and >>>> excluded instruments) and get predictions X2hat. >>>> >>>> 2) Form interactions of X2hat with the exogenous variable X1, that is, X2hat*X1. >>>> >>>> 3) -ivregress- instrumenting for X2 and X2*X1 using X2hat and X2hat*X1. >>>> >>>> Note that there is distinction between two calls to -regress- and >>>> using -ivregress- for 3). >>>> >>>> T >>>> >>>> On Wed, Dec 21, 2011 at 3:43 AM, Nick Kohn <coffeemug.nick@gmail.com> wrote: >>>>> 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/ >>>> >>>> >>>> >>>> -- >>>> 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/ >> >> >> >> -- >> 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/ -- 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/

**Follow-Ups**:**Re: st: Using ivregress when the endogenous variable is used in an interaction term in the main regression***From:*Austin Nichols <austinnichols@gmail.com>

**References**:**st: Using ivregress when the endogenous variable is used in an interaction term in the main regression***From:*Nick Kohn <coffeemug.nick@gmail.com>

**Re: st: Using ivregress when the endogenous variable is used in an interaction term in the main regression***From:*Tirthankar Chakravarty <tirthankar.chakravarty@gmail.com>

*From:*Nick Kohn <coffeemug.nick@gmail.com>

*From:*Tirthankar Chakravarty <tirthankar.chakravarty@gmail.com>

*From:*Nick Kohn <coffeemug.nick@gmail.com>

*From:*Tirthankar Chakravarty <tirthankar.chakravarty@gmail.com>

*From:*Nick Kohn <coffeemug.nick@gmail.com>

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