re: st: Different coefficient magnitudes in ols and 2sls estimation

[Kit Baum <baum@bc.edu>]

<>
Alternatively, does it suggest a problem associated with errors in the
raw variable, Y2? That is, the significantly smaller coefficient in
the OLS estimate is attributable to large errors in Y2?
Which estimation is more reliable, OLS or 2SLS?

As you are using ivreg2, try adding the endog(Y2) option to your command, which in effect tests whether it would be appropriate to estimate the equation with OLS. Also, what is the Sargan or Hansen test saying about the validity of your instruments? I presume you have a Z1 and a Z2, rather than Z1 twice as you write.

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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