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From |
Nick Kohn <coffeemug.nick@gmail.com> |

To |
statalist@hsphsun2.harvard.edu |

Subject |
Re: st: Using ivregress when the endogenous variable is used in an interaction term in the main regression |

Date |
Wed, 21 Dec 2011 14:46:16 +0100 |

My model doesn't have X2 as a separate term, so in terms of the model you had it looks like: Y = b*X1*X2 + controls So the only place the endogenous variable comes up is the interaction term At the risk of being repetitive, would these be the correct steps (so essentially only step 3 changes from what you said): 1) regress X2 on all instruments, exogenous variables and controls 2) Form interactions of X2hat with the exogenous variable X1, that is, X2hat*X1 3) ivregress instrumenting for X2*X1 using X2hat*X1. On Wed, Dec 21, 2011 at 1:44 PM, Tirthankar Chakravarty <tirthankar.chakravarty@gmail.com> wrote: > Not quite; here is the recommended procedure (I am assuming that you > have the main effect of the endogenous variable in there as in Y = > a*X2 + b*X1*X2 + controls): > > 1) -regress- X2 on _all_ instruments (included exogenous controls and > excluded instruments) and get predictions X2hat. > > 2) Form interactions of X2hat with the exogenous variable X1, that is, X2hat*X1. > > 3) -ivregress- instrumenting for X2 and X2*X1 using X2hat and X2hat*X1. > > Note that there is distinction between two calls to -regress- and > using -ivregress- for 3). > > T > > On Wed, Dec 21, 2011 at 3:43 AM, Nick Kohn <coffeemug.nick@gmail.com> wrote: >> Thanks for the reply. >> >> My simplified model is (X2 is endogenous): >> Y = b*X1*X2 + controls >> >> In regards to the third option you suggest, would I do the following? >> >> 1) First stage regression to get X2hat using the instrument Z >> 2) Run the first stage again but use X1*X2hat as the instrument for >> X1*X2 (so Z is no longer used) >> 3) Run the second stage using (X1*X2)hat (so the whole product is >> fitted from step 2)) >> >> On Wed, Dec 21, 2011 at 12:24 PM, Tirthankar Chakravarty >> <tirthankar.chakravarty@gmail.com> wrote: >>> You can see my previous reply to a similar question here: >>> http://www.stata.com/statalist/archive/2011-08/msg01496.html >>> >>> T >>> >>> On Wed, Dec 21, 2011 at 2:24 AM, Nick Kohn <coffeemug.nick@gmail.com> wrote: >>>> Hi, >>>> >>>> I have a specification in which the endogenous variable is interacted >>>> with an exogenous variable. Since I cannot multiply the variables >>>> directly in the regression, I create a new variable. In ivregress it >>>> makes no sense to use the entire interaction term as the endogenous >>>> variable. >>>> >>>> I can do the first stage manually (and then use the fitted value in >>>> the main regression), however, from what I remember the standard >>>> errors will be wrong when doing it manually. >>>> >>>> Is there a way to overcome this? >>>> >>>> Thanks >>>> * >>>> * For searches and help try: >>>> * http://www.stata.com/help.cgi?search >>>> * http://www.stata.com/support/statalist/faq >>>> * http://www.ats.ucla.edu/stat/stata/ >>> >>> >>> >>> -- >>> Tirthankar Chakravarty >>> tchakravarty@ucsd.edu >>> tirthankar.chakravarty@gmail.com >>> >>> * >>> * For searches and help try: >>> * http://www.stata.com/help.cgi?search >>> * http://www.stata.com/support/statalist/faq >>> * http://www.ats.ucla.edu/stat/stata/ >> >> * >> * For searches and help try: >> * http://www.stata.com/help.cgi?search >> * http://www.stata.com/support/statalist/faq >> * http://www.ats.ucla.edu/stat/stata/ > > > > -- > Tirthankar Chakravarty > tchakravarty@ucsd.edu > tirthankar.chakravarty@gmail.com > > * > * For searches and help try: > * http://www.stata.com/help.cgi?search > * http://www.stata.com/support/statalist/faq > * http://www.ats.ucla.edu/stat/stata/ * * For searches and help try: * http://www.stata.com/help.cgi?search * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

**Follow-Ups**:**Re: st: Using ivregress when the endogenous variable is used in an interaction term in the main regression***From:*Tirthankar Chakravarty <tirthankar.chakravarty@gmail.com>

**References**:**st: Using ivregress when the endogenous variable is used in an interaction term in the main regression***From:*Nick Kohn <coffeemug.nick@gmail.com>

**Re: st: Using ivregress when the endogenous variable is used in an interaction term in the main regression***From:*Tirthankar Chakravarty <tirthankar.chakravarty@gmail.com>

*From:*Nick Kohn <coffeemug.nick@gmail.com>

*From:*Tirthankar Chakravarty <tirthankar.chakravarty@gmail.com>

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