Dear Statalist:
Is 2SLS (as implemented by ivreg) still efficient if dummy variables or
polynomials are included as exogenous variables/instruments? For example,
would 2SLS be efficient if applied to the following system of equations:
y1 = y2 + x1 + x1^2 + x2 + e1
y2 = y1 + X1 + x3 + x4 + e2
where y1, y2, and x1-x3 are continuous variables, and x4 is a binary
variable. I believe that 2SLS would yield consistent estimates in the above
scenario. However, if not efficient, then what method (Stata command) would
one want to use? I am dealing with repeated measures on subjects (i.e., my
data are clustered), so I would want to use a command that could address
this concern. Thanks.
--
James Shaw
Research Associate
College of Pharmacy
The University of Arizona
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