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st: How to run 2SLS twice

From   Mauro Caselli <[email protected]>
To   statalist <[email protected]>
Subject   st: How to run 2SLS twice
Date   Mon, 14 Feb 2011 22:26:33 +1100

Dear Statalisers,

I am estimating a reduced-form model in which I need to perform 2SLS twice.
In particular, this is the empirical model:
1) y = a + b1 * x1 + b2 * z1 + e
2) z1 = c + b3 * x2 + b4 * z2 + u
3) z2 = d + b5 * x3 + v
e, u and v are classical error terms; x1, x2 and x3 are exogenous vectors.
Provided that x3 is a valid and informative instrument, what is the
best way to estimate this in Stata? I can think of different ways:
1. Estimate equation 3). Then use the fitted values to estimate 2)
(correcting for the standard errors). And then again use the fitted
values to estimate 1) (again correcting for the standard errors).
2. Instead of running 3 regressions, I could run ivreg2 or ivregress
2sls for the first two regressions or the last two and in either case
use the fitted values from the remaining equation (once again
correcting for the standard errors). But in this case, which
regressions is it better to estimate with ivreg2 or ivregress 2sls?
3. Last, use reg3 with the iv option.

I look forward to any type of comment regarding this.


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