re: st: 2SLS with selected instruments only

[Kit Baum <baum@bc.edu>]

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I would like to ask you about the command to run 2SLS with instruments that
can selected. I know that STATA provides IVREGRESS to run 2sls but I have
the following problem. For example, when I put this command:

IVREGRESS 2sls dependent control1 control 2 (control 3 = instrument 1
instrument 2);

STATA automatically treats CONTROL 1 and CONTROL 2 as INSTRUMENT 3 and
INSTRUMENT 4; while in my regression, CONTROL 1 and CONTROL 2 can NOT be
instruments for CONTROL 3 even they are exogenous. I want to regress CONTROL
3 on INSTRUMENT 1 and INSTRUMENT 2 only; but I do not know how I can do it.

Could you please advise me how to solve it?

Moreover I would like to calculate Thompson(2009) Standard Errors that
clusters both firms and time,  for OLS fixed effect and for this 2SLS; could
you please advise me how I can do that? Is there any option for it?


a) you cannot exclude the included exogenous variables from the instrument matrix, as is often pointed out on this list. 2SLS requires that you use all instruments as regressors for each RHS endogenous variable.

b) The latest version of -ivreg2- (Baum-Schaffer-Stillman) and -xtivreg2- (Schaffer-Stillman) support two-way clustering, using Thompson's algorithm. They are available from SSC, and the former is required for use of the latter. Despite their names they will deliver OLS results as well as IV / 2SLS results.

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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