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Re: st: IV vs 2SLS
From
David Greenberg <[email protected]>
To
[email protected], [email protected]
Subject
Re: st: IV vs 2SLS
Date
Thu, 2 Aug 2012 20:29:18 -0400
There is a reason for the difference in standard errors. When you
predict x3_hat and use the predicted value in your second equation,
Stata doesn't know that x3_hat is not an observed variable, but an
estimate with some uncertainty attached to it. It treats this variable
as observed, and without measurement error. Consequently, this
procedure underestimates the standard errors of estimates obtained
using the second strategy. David Greenberg, Sociology Department, New
York University
On Thu, Aug 2, 2012 at 8:16 PM, Shikha Sinha <[email protected]> wrote:
> Dear all,
>
> What is the difference between IV and 2sls and which is the preferred
> method to correct for endogeneity (advantage and disadvantage)?
>
> (a) ivreg2 y x1 x2 (x3=z)
>
> (b) reg x3 z x1 x2
> predict x3_hat
> reg y x3_hat x1 x2
>
> By employing (a) and (b) I get similar coeff, but standard errors are
> different.
>
> Thanks,
> Shikha
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