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st: Estimating a translog production function


From   Norman Maldonado <normanmva@yahoo.es>
To   "statalist@hsphsun2.harvard.edu" <statalist@hsphsun2.harvard.edu>
Subject   st: Estimating a translog production function
Date   Mon, 2 Dec 2013 20:13:04 +0000 (GMT)

Hi everyone,

I need to estimate the following translog production function:

LnY = b0 + b1*LnK + b2*LnL + b3*LnK*LnL + b4*LnK*LnK + b5*LnL*LnL

where Y is output, K is capital and L is labor. Thus, Y is a function of K, L, and all possible interactions (K-L, K-K, L-L). Now, K and L are usually endogenous. For simplicity let's say only K is endogenous, and let's assume a good instrument is the number of firms in the market (nfirm). Using Greene's dataset, the code in Stata should look like:

* Data
use http://www.stata-press.com/data/r12/greene9

* Basic OLS regression (this one works!)
reg lnv c.lnk##c.lnl c.lnk#c.lnk c.lnl#c.lnl

* IV Regression (does not work)
ivregress 2sls lnv c.lnk##c.lnl c.lnk#c.lnk c.lnl#c.lnl (c.lnk = nfirm)

The error message I got is:

lnk included in both exogenous and endogenous variable lists
r(498);

I'm trying to find a way to carry out this IV estimation. Any ideas?


Thanks in advance for any help,

Norman M

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