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Re: st: IV vs 2SLS


From   William Buchanan <william@williambuchanan.net>
To   "statalist@hsphsun2.harvard.edu" <statalist@hsphsun2.harvard.edu>
Subject   Re: st: IV vs 2SLS
Date   Thu, 2 Aug 2012 17:57:01 -0700

Shikha,

The question that you are asking and the example that you are providing are not clear.  You should first read the help file for -ivregress- and I would also suggest looking through the resources that are available in the -ivreg2- help file (available for download from SSC).  Most econometrics texts will also explicitly advise you not to estimate the model like you did in your second example.  Last, the estimator that you should select for your analysis will rarely be a matter of some blanket application and would depend strongly on the data that you have and the assumptions you are willing to make.

HTH,
Billy

Sent from my iPhone

On Aug 2, 2012, at 17:16, Shikha Sinha <shikha.sinha414@gmail.com> wrote:

> Dear all,
> 
> What is the difference between IV and 2sls and which is the preferred
> method to correct for endogeneity (advantage and disadvantage)?
> 
> (a) ivreg2 y x1 x2 (x3=z)
> 
> (b) reg x3 z x1 x2
> predict x3_hat
> reg y x3_hat x1 x2
> 
> By employing (a) and (b) I get similar coeff, but standard errors are
> different.
> 
> Thanks,
> Shikha
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