Re: st: RE: instruments in ivreg2

[Bidisha Mandal <mandal.7@osu.edu>]

Mark,

Thank you for the references.

Bidisha Mandal

Dept. of AED Economics
The Ohio State University  


Schaffer, Mark E wrote:

> Bidisha, 
>   
> > -----Original Message-----
> > From: owner-statalist@hsphsun2.harvard.edu 
> > [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of 
> > Bidisha Mandal
> > Sent: 23 October 2006 18:04
> > To: statalist@hsphsun2.harvard.edu
> > Subject: Re: st: RE: instruments in ivreg2
> >
> > Kit and Steve,
> >
> > Thank you. I think I have finally figured out the appropriate 
> > instruments. I have 2 endogenous regressors, and managed 4 
> > excluded instruments. The overidentification test gives a 
> > p-value of 0.15.
> > I do have another question though. Change in Marital status 
> > (the endogenous regressor) is categorical. So I am doing the 
> > 2SLS by brute force, using logistic regression in the first 
> > stage. Obviously correcting for the standard errors is 
> > slightly more complicated. Any suggestion?
> >     
> This comes up a lot on Statalist.  Have a look at, e.g.,
>
> http://www.stata.com/statalist/archive/2004-09/msg00339.html
> http://www.stata.com/statalist/archive/2006-10/msg00316.html
> http://www.stata.com/statalist/archive/2006-10/msg00275.html
> http://www.stata.com/statalist/archive/2004-08/msg00662.html
>
> and quite a few others over the years.
>
> Cheers,
> Mark
>
> Prof. Mark Schaffer
> Director, CERT
> Department of Economics
> School of Management & Languages
> Heriot-Watt University, Edinburgh EH14 4AS
> tel +44-131-451-3494 / fax +44-131-451-3296
> email: m.e.schaffer@hw.ac.uk
> web: http://www.sml.hw.ac.uk/ecomes
>
>   
> > Thanks again,
> >
> > Bidisha Mandal
> >
> > Dept. of AED Economics
> > The Ohio State University  
> >
> >
> > Steven Stillman wrote:
> >     
> > > Hi Bidisha.
> > >
> > > As Kit points out, it is fine to use a time-invariant 
> > >       
> > variable as an 
> >     
> > > excluded instrument for a time-variant endogenous variable, but you 
> > > are quite likely to end up with a weak instrument problem.
> > >
> > > Depending on your data, you might be able to create slightly more 
> > > informative time-variant instruments such as the number of 
> > >       
> > cumulative 
> >     
> > > years of each parent's current marriage or number of years 
> > >       
> > since being 
> >     
> > > married if not-married, cumulative number of marriages for each 
> > > parent, average length of each parents marriages, etc.  If 
> > >       
> > your data 
> >     
> > > allows you to create more than one instrument of this flavour, you 
> > > could then run an overidentification test.  You would still need to 
> > > carefully test that none of these instruments was weak.
> > >
> > > Cheers,
> > > Steve
> > >
> > > -----Original Message-----
> > > From: owner-statalist@hsphsun2.harvard.edu
> > > [mailto:owner-statalist@hsphsun2.harvard.edu]On Behalf Of Kit Baum
> > > Sent: Sunday, October 22, 2006 1:59 PM
> > > To: statalist@hsphsun2.harvard.edu
> > > Subject: st: instruments in ivreg2
> > >
> > >
> > > Bidisha said
> > >
> > > d(mental health) = a1 + d(marital status) + d(income) + e1
> > >
> > > You realize that the presence of the constant in this 
> > >       
> > equation implies 
> >     
> > > that there is a trend in mental health status? Although 
> > >       
> > many of us may 
> >     
> > > feel that way, I wonder if you really mean that. Same issue 
> > >       
> > arises for 
> >     
> > > the second equation.
> > >
> > > As to your question -- whether you can use parents' marital status 
> > > (presumably still married v. divorced or widowed) as an 
> > >       
> > instrument for 
> >     
> > > the change in marital status observed in your sample... Surely you 
> > > will observe some changes in your sample. For parents' 
> > >       
> > status to be a 
> >     
> > > valid instrument, it must be correlated with the endogenous 
> > >       
> > measure ( 
> >     
> > > d(mar.status)) and independently distributed of the error e1. The 
> > > latter is reasonable, given that parental status is 
> > >       
> > predetermined; but 
> >     
> > > I wonder how well correlated it will be to the included 
> > >       
> > measure. Look 
> >     
> > > at the first stage regression results closely.
> > >
> > > As you have written them, both of these equations appear exactly 
> > > identified, so that you cannot carry out any overid tests.
> > >
> > > Kit Baum, Boston College Economics
> > > http://ideas.repec.org/e/pba1.html
> > > An Introduction to Modern Econometrics Using Stata:
> > > http://www.stata-press.com/books/imeus.html
> > >
> > >
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