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Re: Re: st: simultaneous equations with panel data, endogenous regressors and


From   Agnese Romiti <romitiagnese@gmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   Re: Re: st: simultaneous equations with panel data, endogenous regressors and
Date   Sat, 7 Apr 2012 15:31:34 +0200

Kit,

Thanks. I was looking for a reference supporting the use of estimating
separately each equation by 2SLS instead of using the 3SLS. Do you
have anything to recommend?

Thanks again
Agnese


2012/4/6 Christopher Baum <kit.baum@bc.edu>:
> <>
> many thanks for your suggestion. I still have a question, though.
> Since I have two simultaneous equations, I should control for the
> dependency in the two error terms.
> Does your suggestion control for the latter as well?
>
> It is a common misconception that this is necessary. It is not, as is often pointed out on the list. That is, 3SLS is never necessary unless
> you are trying to impose cross-equation constraints. 2SLS on each equation will give you consistent estimates if their specification
> is valid. 3SLS can potentially improve efficiency, but will also cause all equations' estimates to be inconsistent if one of them
> is misspecified. Thus limited-info (single-equation) estimation has much to recommend it.
>
> Here endeth the lesson.  ( I gave this same lecture to my class on Wednesday. )
>
> 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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