Notice: On April 23, 2014, Statalist moved from an email list to a forum, based at statalist.org.

[Date Prev][Date Next][Thread Prev][Thread Next][Date Index][Thread Index]

From |
Henry Arnfeld <harnfeld@gmail.com> |

To |
statalist@hsphsun2.harvard.edu |

Subject |
st: xtivreg: Interaction of endogenuous treatment and (exogenuous) weather variable as instrument? |

Date |
Sat, 26 Jan 2013 14:48:17 +0000 |

Dear all, I have been puzzled by whether I can use an interaction term as an instrumental variable. The reduced form relationship I like to study is the following: Y_dt = a_d + b_t + g*Z_dt + b*T_dt + c*Z_dt*T_dt +e_dt I am interested in the coffecicient on the interaction term Z_dt*T_dt , which tells me how the relationship between the weather variable Z_dt and the left hand side changed, after the treatment. I want to argue that the reason for this change is due to an effect of Z_dt*T_dt on a variable w_dt. The variable w_dt is likely to be endogenuous to the left-hand side; also the treatment indicator T is endogenuous to the left hand side as well. The variable Z_dt (some weather variable) may have a direct effect on Y_dt other than through w_dt, so it is not a valid instrument in itself. The process for w_dt is: w_dt = a_d + b_t + b*T_dt + c*Z_dt + d*T_dt*Z_dt +e_dt The product of Z_dt and T_dt is likely to be exogenuous to Y_dt as treatment assignment was not a function of the Z; reverse causality is also not an issue as Z is a weather variable. Can I use solely the interaction term Z_dt * T_dt as an instrument for w_dt? I.e. in stata I would try the following: xtivreg2 Y Z T (w = ZT) , fe cluster(dd) This means that I still allow for a direct effect of Z and T on the left-hand side, and explain the variable of interest w only through the variation I have in the product Z*T. I am not sure whether this makes any sense -- does anybody have some thoughts on this approach, whether it is valid? I have not come across an approach of this form... Thanks a lot for your help and thoughts, Henry * * For searches and help try: * http://www.stata.com/help.cgi?search * http://www.stata.com/support/faqs/resources/statalist-faq/ * http://www.ats.ucla.edu/stat/stata/

- Prev by Date:
**Re: st: Regression Diagnostics for Models with cluster-robust standard errors** - Next by Date:
**Re: st: QUAIDS** - Previous by thread:
**st: Meta-analysis metandi, metandiplot, HSROC** - Next by thread:
**st: Wishlist for Stata 13 - SQL language** - Index(es):