Anson,
Another way to put it is that the IV estimator is a single-equation,
limited information estimator. You say that your model is structural,
so in effect you are saying that your "first-stage" regression is not a
standard IV first-stage linear projection at all - it's a structural
equation. If so, then you are no longer in IV land; you want to use
instead a multiple-equation, full information estimator, e.g., 3SLS.
It's worth emphasising that IV is still giving you consistent estimates,
and the rationale for moving to 3SLS or some other system estimator is
to get more efficient estimates. Of course, the usual
efficiency-robustness tradeoff also kicks in - 3SLS might be more
efficient than IV, but it also requires more assumptions than IV for
consistency.
Hope this helps.
Cheers,
Mark
> -----Original Message-----
> From: [email protected]
> [mailto:[email protected]] On Behalf Of Kit Baum
> Sent: 18 June 2009 16:07
> To: [email protected]
> Subject: st: re: Re: Suppressing the Constant in the First
> Stage with ivreg2
>
> <>
> Anson said
>
> Thank you for the response. You are exactly right about
> include a vector of ones and specifying noc, it will be
> included. Is there a way to force ivereg2 not to include an
> exogenous var (ie iota) in the
> FSRs? All I can say is the model is structural, and there is a heavy
> theoretical justification for suppressing the constant in the
> first stage.
>
>
>
> As I understand it there is no justification in terms of
> econometric theory for suppressing the constant in the FSR if
> a constant appears in the structural equation to be
> estimated. The specification of FSRs is driven by your desire
> to use an estimator which produces consistent estimates of
> the structural equation when OLS does not. If you use that IV
> estimator, you must play by the rules. The Z matrix contains
> all instruments, included and excluded, in the model. If you
> include iota in the model, it must appear in the Z matrix,
> and will then be used in the IV formula.
>
> Kit Baum | Boston College Economics & DIW Berlin |
> http://ideas.repec.org/e/pba1.html
> An Introduction to Stata Programming
> | http://www.stata-press.com/books/isp.html
> An Introduction to Modern Econometrics Using Stata |
> http://www.stata-press.com/books/imeus.html
>
>
>
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