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st: re: 2sls with multiple endogenous variables


From   Kit Baum <baum@bc.edu>
To   statalist@hsphsun2.harvard.edu
Subject   st: re: 2sls with multiple endogenous variables
Date   Mon, 17 Dec 2007 13:30:26 -0500

Ana replied:

I would like to ask for your advice regarding the
following model:

poverty=hhchar,farmchar,prod,mkt
prod=hhchar,farmchar,irrig,hhcomp
mkt=hhchar,farmchar,transport,road,ethnic

Would it be okay to estimate the model using SUR?
Could you please suggest a way to estimate the model?



NO. SUR is a systems estimator for systems of equations which each may be consistently estimated by OLS.

You have a recursive system here, in that both prod and mkt depend only on exogenous variables. You should do

ivreg2 poverty hhchar farmchar (prod mkt = irrig hhcomp transport road ethnic)

to estimate this model.

You could probably use -reg3- as well to impose the zero restrictions on instruments. I'm not sure that would make much difference, though, and Stata's -reg3- is much less capable than -ivreg2- (or official - ivregress-) in being able to deal with non-iid errors (e.g. it cannot even estimate using -robust-, let alone cluster() or HAC). I would worry about that in terms of the reliability of interval estimates and inference.


Kit Baum, Boston College Economics and DIW Berlin
http://ideas.repec.org/e/pba1.html
An Introduction to Modern Econometrics Using Stata:
http://www.stata-press.com/books/imeus.html


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