Dear statalists,
I know both of omitted variables and simultaneity can induce endogeneity.
With regards to endogeneity arising from omitted variables, one can apply iv instruments method for the endogenous variable. And for the arise from simultaneity, one can set up and estimate simultaneous equation model.
What confuses me is that whether the two methods are the same.
For example,
Assuming the SEM is as followings,
y1=cons+y2+z1+u1
y2=cons+y1+z2+z3+z4+z5+...+z10+u2
In view of simultaneity, the SEM can be easily estimated by - reg3- with 2sls option. Concretely, I can treat z2 z3 z4 z5...z10 as iv instruments for y2, and apply 2sls to estimate equation y1. Similar for equation y2.
For equation y1, if the endogeneity of y2 is not from simultaneity, but from omitted variables, how to solve it ?
Can I still take z2 z3 z4 z5 ...z10 as iv instruments for y2?
Hope my expression is not too confusing.
I know it is more an econometric question, however, hope for any help.
Thank you very much.
Best regards,
Rose.
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