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st: AW: Instrument variable
From
"Martin Weiss" <[email protected]>
To
<[email protected]>
Subject
st: AW: Instrument variable
Date
Fri, 6 Aug 2010 13:32:23 +0200
<>
You can experiment with this code:
*************
clear*
set obs 10000
mat in correls = /*
*/ (1,0,.8,0,.5\0,1,0,-.6,.3\.8,0,1,0,0\0,-.6,0,1,0\.5,.3,0,0,1)
//x1, x2 endogenous, instr1, instr2 as valid instruments
drawnorm x1 x2 instr1 instr2 error, /*
*/ corr(correls) cstorage(full) clear
la var x1 "Endogenous Regressor 1"
la var x2 "Endogenous Regressor 2"
la var instr1 "Instrument 1"
la var instr2 "Instrument 2"
la var error "Error"
//exogenous regressor x3
gen x3=rnormal()
la var x3 "Exogenous Regressor"
//see correlation matrix
corr
//DGP
gen y=2+2*x1-x2+1.5*x3+error
//regression assuming exogeneity
reg y x?
est store OLS
//(correct) IV regression
ivregress 2sls y x3 (x1 x2 = instr1 instr2)
est store corriv
//instrument just one endogenous regressor (x1)?
ivregress 2sls y x2 x3 (x1 = instr1 instr2)
est store onlyone
//or the other one (x2)?
ivregress 2sls y x1 x3 (x2 = instr1 instr2)
est store onlytwo
//let`s compare results
di "Correct DGP: " in r "y=2+2*x1-x2+1.5*x3+error"
est table OLS corriv onlyone onlytwo, label
*************
As you can see, you get the correct result for the covariate that you do
instrument, and the incorrect one for the one where you do not...
HTH
Martin
-----Ursprüngliche Nachricht-----
Von: [email protected]
[mailto:[email protected]] Im Auftrag von Bin Dong
Gesendet: Freitag, 6. August 2010 12:14
An: [email protected]
Betreff: st: Instrument variable
Dear all,
If there are three endogenous variables in one model, do I need to
instrument all of them at once? Or can I just instrument one of the
endogenous variables? Thanks
Cheers,
Bin
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