# st: Re: IVreg and curvelinear effects

 From Ricardo Gon�alves Silva <[email protected]> To <[email protected]> Subject st: Re: IVreg and curvelinear effects Date Tue, 18 Jan 2005 17:35:37 -0200

Hi
If your reasoning were correct, I believe that
gen x1_2 = x1*x1
ivreg x1 x1(2) control1 control2, (x1=z1) (x1_2=2)
do the same thing with corrected sd.

But I not sure about the tranformation. If X is endogenous in a regression
then any "linear" tranformation of it is also endogenous. However taking squares
is not linear, so I dont know if the new variable still endogenous. Perhaps a Hausman-type
test for endogenity may help.

Ricardo
----- Original Message ----- From: <[email protected]>
To: <[email protected]>
Sent: Tuesday, January 18, 2005 4:35 PM
Subject: st: IVreg and curvelinear effects

```

Hi listers,

My substantive curvelinear regression equation is

Y = a + b1(x1) + b2(x1*x1) + control1 + control2

However, I'm pretty certain that x1 is endogenous and determined by the
instruments z1 and z2. My intuition then tells me that x1*x1 must be
endogenous too. Hence my "manual" solution would be to:

reg x z1 z2
predict test
gen testsq=test*test
reg y test testsq control1 control2

Two qustions:
1. Is my intuition/reasoning correct here?
2. Can this be done more automatically, so that I get correct standard
errors (I assume they ar wrong in my manual solution)?

Thanks in advance for any help.

Best regards,

Christer Thrane

qustion: How do I perform the IVreg in this setting

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