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From | natasha agarwal <agarwana2@googlemail.com> |
To | statalist@hsphsun2.harvard.edu |
Subject | st: xtivreg2 |
Date | Fri, 4 Feb 2011 15:15:44 +0000 |
Dear Statalist, I have a question relating to the use of xtivreg2. I am estimating a cobb-douglas production function where I am regressing Y = L+K+CF+FDI+CF*FDI+year dummies+error I believe that cash flow (CF)and output (Y) in the above regression have reverse causality, i.e. CF determines Y but Y could also determine CF. So I thought instrumenting CF would be the best idea to break the reverse causality. To do so I first differenced the above equation and then used lags levels of CF of year 2 and year 3 as the instrument. However, I don't know how would one do the instrumenting when the endogenous variable is interacted with the exogenous variable?? I would be grateful if anyone could help me on this. Many thanks Natasha * * For searches and help try: * http://www.stata.com/help.cgi?search * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/