st: IV first stage, w/out all exogenous variables: reference needed

["Vivian Hoffmann" <veh4@cornell.edu>]

Hi all,

I'm looking for a reference for Vince Wiggins' FAQ post "Must I use all of
my exogenous variables as instruments when estimating instrumental
variables regression?"

I've looked at the Baltagi book Wiggins references, which emphasizes the
need to include all the X's from the second stage in the first stage. What
I need is a reference to the exception to this rule noted by Wiggins:

"That is when the system is triangular such that Y2 does not depend on Y1,
but you believe it is weakly endogenous because the disturbances are
correlated between the equations. You are still consistent in this case to
do what ivreg does and retain X1 and X2 as instruments. They are, however,
no longer required. In that case, you could do what you suggested and just
regress on the predicted instruments from the first stage."

Does anyone know of a textbook reference for this point?

Thanks very much!
Vivian

Vivian Hoffmann
PhD Candidate
Applied Economics and Management
Cornell University
1.607.316.7291




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