This questions seems to come up quite often. In fact, there is a related
FAQ at http://www.stata.com/support/faqs/stat/ivreg.html. The bottom line
is that all excluded exogenous variables must be used as instruments for all
endogenous variables in any IV model. In addition, even if there is a
structural relationship, one endogenous variable can never be used as an
instrument for another. This can be clearly seen if you take your
underlying structural model and rewrite it as a reduced-form model with only
exogenous variables as independent variables. The only exception to this
is when you have a recursive or triangular system (the FAQ explains this in
more detail), but this does not sound like your situation.
Steve
> -----Original Message-----
> From: Felipe Targa [SMTP:[email protected]]
> Sent: Wednesday, July 30, 2003 2:58 AM
> To: [email protected]
> Subject: st: xtivreg instruments
>
> I am estimating a GLS random-effects for panel data using the xtivreg
> STATA command. I have two endogenous variables. However, in my
> specification these two endogenous variables are affected by a different
> set of exogenous variables. STATA takes the exogenous variables affecting
> the first endogenous variable as regressors for the second endogenous
> variable. I would like to know what I can do to restrict the estimation of
> the first endogenous variable with ONLY the exogenous variables specified
> in the command (one of them is the other endogenous variable).
>
> Thank you,
>
> Felipe Targa
>
>
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