Re: st: RE: re: Re: Suppressing the Constant in the First Stage with ivreg2

[Anson Soderbery <asoderbe@gmail.com>]

That is exactly what I am trying to say (poorly I admit), Mark.  It is  
not really a classic regression framework that leads to interpretable  
parameters (and as a consequence there is little intuition behind the  
first stage).  I wanted to go to LIML to check if it will improve the  
small sample performance, and 3sls is not a possibility in practical  
applications.  Thank you all for your help.
On Jun 18, 2009, at 8:31 AM, Schaffer, Mark E wrote:

> 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: owner-statalist@hsphsun2.harvard.edu
> > [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of Kit Baum
> > Sent: 18 June 2009 16:07
> > To: statalist@hsphsun2.harvard.edu
> > 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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