# RE: st: re: How to correct standard errors of a 2sls performed by

 From DE SOUZA Eric To "'statalist@hsphsun2.harvard.edu'" Subject RE: st: re: How to correct standard errors of a 2sls performed by Date Sat, 6 Feb 2010 18:02:58 +0100

```If you solve your SEM, you will see that m1 and m2 are exogenous for the block y, x1, x2

Eric de Souza
College of Europe
BE-8000 Brugge (Bruges)
Belgium

-----Original Message-----
From: owner-statalist@hsphsun2.harvard.edu [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of John Antonakis
Sent: 06 February 2010 16:07
To: statalist@hsphsun2.harvard.edu
Subject: Re: st: re: How to correct standard errors of a 2sls performed by

Hi Kit:

One difference is that x1 is entirely dependent on endogenous variables; so my naive question here is: which predicted values of x1 and x2 are included in Eq. 2 and 3 respectively (also knowing that x1 and x2 predict each other and that x1 has no unique instruments that predict it directly)?

Thanks,
John.

____________________________________________________

Prof. John Antonakis, Associate Dean
Department of Organizational Behavior
University of Lausanne
Internef #618
CH-1015 Lausanne-Dorigny
Switzerland

Tel ++41 (0)21 692-3438
Fax ++41 (0)21 692-3305

Faculty page:
http://www.hec.unil.ch/people/jantonakis

Personal page:
http://www.hec.unil.ch/jantonakis
____________________________________________________

On 06.02.2010 14:47, Kit Baum wrote:
> <>
> John writes
>
> how does one do single-equation
> estimation with in the context of a non-recursive system.  Again, here
> is the example:
>
> Eq1: y = x1 + x2 + z
> Eq2: x1 = m1 + m2 + x2 + z
> Eq3: x2 = n1 + n2 + x1 + z
> Eq4: m1 = q1 + q2 + z
> Eq5: m2 = p1 + p2 + z
>
> The predicted value of x2 enters in Eq. 2; however, the predicted
> value of x1 enters in Eq. 3. So, how does one go about estimating this
> non-recursive model using a single-equation estimator?
>
>
> In the textbook example used to motivate 2SLS, we write down a demand equation and a supply equation, both of which contain Q and P along with demand shifters and supply shifters. How is that different from eq2-3?
>
> Q = b0 + b1 P + b2 Y + e
> P = g0 + g1 Q + g2 R + g3 T + v
>
> with Y=income, R=rainfall, T=temperature.
>
> Those who developed IV / 2SLS were able to consistently estimate these equations by limited-information (single-equation)  before systems estimators were devised. For that matter LIML could be used to estimate these equations as well (in either -ivregress- or -ivreg2- from SSC).
>
> Kit Baum   |   Boston College Economics & DIW Berlin   |   http://ideas.repec.org/e/pba1.html
>                               An Introduction to Stata Programming  |   http://www.stata-press.com/books/isp.html
>    An Introduction to Modern Econometrics Using Stata  |   http://www.stata-press.com/books/imeus.html
>
>
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