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Re: st: RE: ivreg2 questions

From   Austin Nichols <[email protected]>
To   [email protected]
Subject   Re: st: RE: ivreg2 questions
Date   Tue, 20 Mar 2012 10:14:33 -0400

Robert Davidson <[email protected]>:
Can you quote the exact text you are reading?  IMEUS section 8.10
makes quite clear that partial correlations are at issue (cf footnote
25), as do Angrist and Pischke.  The excluded instruments are always
judged in the context of a larger regression; instruments that look
good with one set of controls can look terrible with another set,
either on the basis of weak instruments or overidentification tests,
or both.

On Mon, Mar 19, 2012 at 8:38 PM, Robert Davidson <[email protected]> wrote:
> Mark,
> Sorry for what is purely an econometric question at this point
> (removed from Stata) but there is still one thing that I am
> misunderstanding.  In every text I can read, it basically says the
> instrument must be correlated with the endogenous regressor (including
> Mostly Harmless Econometrics and an Introduction to Modern
> Econometrics Using Stata to name 2 - the latter stating the instrument
> must be highly correlated).  These texts do not state that the
> instrument must have a high correlation with the endogenous regressor
> with the effect of a set of controlling variables removed (partial
> correlation).  Is this just a simplification on the part of these
> texts or again is there something I am missing?  And does this
> basically mean that the validity of an instrument is conditional on
> the other independent variables included in the primary model and not
> just the dependent variable and the endogenous regressor?
> Thank you again,
> Rob

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