I think this might be a case of a "forbidden regression", something that
comes up on Statalist from time to time:
http://www.stata.com/statalist/archive/2005-05/msg00158.html
http://www.stata.com/statalist/archive/2003-11/msg00795.html
--Mark
> -----Original Message-----
> From: owner-statalist@hsphsun2.harvard.edu
> [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of
> Arne Risa Hole
> Sent: 23 March 2006 17:31
> To: statalist@hsphsun2.harvard.edu
> Subject: Re: st: Re:
>
> I suppose an alternative approach would be to do something like this:
>
> use http://fmwww.bc.edu/ec-p/data/hayashi/griliches76.dta,
> clear qui regress iq med kww expr tenure rns smsa predict
> double iq_hat gen double intact = iq_hat*expr qui regress lw
> iq_hat intact s expr tenure rns smsa replace iq_hat = iq
> replace intact = iq*expr predict double res, residual gen
> double res2 = res^2 qui sum res2 scalar iv_mse =
> r(mean)*r(N)/e(df_r) matrix b = e(b) matrix V =
> e(V)*(iv_mse/e(rmse)^2) ereturn post b V ereturn display
>
> i.e. get the forecast y2hat (iq_hat in the example) from the
> first-stage regression and interact this with the exogenous
> RHS var x1 (expr in the example). Then you replace the
> interaction with y2*x1 before calculating the residuals/MSE.
>
> Austin's suggestion is probably the better one though, but
> this seems to me to be ok.
>
> Cheers
> Arne
>
> On 23/03/06, Austin Nichols <austinnichols@gmail.com> wrote:
> > If your endog RHS var y2 is interacted with an exog RHS var
> x1, then
> > you have a "new" endog RHS var y2x1, and you may need additional
> > excluded instruments. Use -ivreg- as suggested.
> >
> > On 3/23/06, Paolo Caruso <P.Caruso@warwick.ac.uk> wrote:
> > > Thanks for your replies.
> > >
> > > The reason why I want to exclude the variables is because
> they are interactions (based on the variable that I am
> instrumenting) therefore, it can not be valid to include them
> in the first stage. If there is any other way of avoiding
> this problem then please let me know.
> > >
> > > Thank you for the commands but the actual problem I am
> having is if it is possible to do the same thing apart from
> with more than one instrumented variable and what additional
> commands I would have to do in order to ensure the correct
> t-stats are reported.
> > >
> > > Regards,
> > >
> > > Paolo
> > >
> > > >>> austinnichols@gmail.com 03/23/06 14:08 PM >>>
> > > It is worse than "not a good idea" to pick and choose among exog
> > > vars to include in the first stage--it is not the IV
> estimator, and
> > > you would have to derive consistency results for your new
> homemade
> > > estimator based on different assumptions. You are better off
> > > sticking with -ivreg- or -ivreg2- to be sure. If you want
> to include
> > > d7usq=d7unit^2 as a new endogenous RHS variable, you now have two
> > > endog variables, and you may need more excluded
> instruments--but the
> > > products (with exog vars) and powers of your existing excluded
> > > instrument(s) are candidates.
> > >
> > > On 3/23/06, Arne Risa Hole <arnehole@gmail.com> wrote:
> > > > You can try the following code:
> > > <snip> This replicates:
> > > >
> > > > ivreg lw expr tenure rns smsa (iq s=med kww)
> > > >
> > > > If you want to remove some of the instruments simply drop them
> > > > from the first stage regressions. Note that not using all the
> > > > exogenous variables as instruments is probably not a
> good idea -
> > > > see http://www.stata.com/support/faqs/stat/ivreg.html.
> > > >
> > > > On 23/03/06, Paolo Caruso <P.Caruso@warwick.ac.uk> wrote:
> > > > > This is a question with regards to IV's.
> > > > >
> > > > > I am using STATA in order to do a 2SLS. STATA does
> not allow you to specify which variables to include or not
> include in the first stage. This means that I have to
> complete the regression in the separate two stages.
> > > > >
> > > > > I know how to adjust the MSE when I have one variable
> that I want to instrument, however, I do not know how to do
> it when I have more than one.
> > > > >
> > > > > The command lines in stata to adjust the MSE for one
> variable are as follows:
> > > > <snip> ereturn display
> > > > >
> > > > > where d7unit is the variable that I want to
> instrument and loginc is the dependant variable.
> > > > >
> > > > > I would also like to instrument d7unit^2 and this is
> where I am unsure what the relevant command lines would be in
> order to ensure that the correct MSE is used.
> > > > >
> > > > > Any help would be much appreciated.
> > >
> > > *
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> > >
> > >
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> > >
> >
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> >
>
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