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Re: st: Interactions using -xtivreg- Instrumental Variables estimation


From   Vidhya Soundararajan <[email protected]>
To   [email protected]
Subject   Re: st: Interactions using -xtivreg- Instrumental Variables estimation
Date   Wed, 31 Jul 2013 19:32:51 -0400

Hi David,

That is correct. You typically include your interact your instruments
with the same variables as the endogenous variables are interacted
with. Unless of course you have other non-interacted instruments as
well, which can be added to the list.

I think thought you need to manually generate these interacted
variables (both endogenous and instruments) and include them. I do not
think STATA accepts interaction operators in its list of endogenous
regressors or instruments (may be newer version do, I may be wrong).

What is forbidden in this case though is "the forbidden regression" -
see Wooldridge (2000), Econometric Analysis of Cross Section and Panel
Data, section 9.5, esp. pp. 236-7 and a similar earlier question on
statalist - http://www.stata.com/statalist/archive/2003-11/msg00795.html.
There are many more similar questions like this on statalist and
useful discussions surrounding this, as well that can help you

Best,
Vidhya


On Wed, Jul 31, 2013 at 7:11 PM, David Torres <[email protected]> wrote:
>
> I'm still hoping someone can answer the question below, which I sent yesterday.
>
> >
> > Hello, all,
> >
> > So I'm using an instrumental variables approach with two-level data using Stata's -xtivreg- command. My single IV relates to a level-one time-varying variable. I'd like to include interactions between the level one variable and dummies at level two denoting sex and race/ethnicity.
> >
> > How is this done? Do I produce interactions between the instrument and my dummies, as well as between the variable being instrumented for and my dummies, and then simply insert everything in my model like this:
> >
> > xtivreg mathsc year male black hispan othrace (var1 var1*male var1*black var1*hispan var1*othrace = instrument instrument*male instrument*black instrument*hispan instrument*othrace), re
> >
> > or should I be setting the model up differently?
> >
> > Thanks in advance for your help.
> >
> >
> >
> > *
> > * For searches and help try:
> > * http://www.stata.com/help.cgi?search
> > * http://www.stata.com/support/faqs/resources/statalist-faq/
> > * http://www.ats.ucla.edu/stat/stata/
> *
> *   For searches and help try:
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> *   http://www.ats.ucla.edu/stat/stata/

*
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