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st: a question on creating interaction in 2SLS using xtivreg


From   Kun Liu <[email protected]>
To   "." <[email protected]>
Subject   st: a question on creating interaction in 2SLS using xtivreg
Date   Sat, 3 Dec 2011 23:29:01 -0500 (EST)

Hi, I use 2SLS on a panel data. I want to test some hypotheses on interactions between an independent variable and a control variable in the second stage. Using xtivreg, the command would look like :
xtivreg dependentvariable (instrument= predictors of the first stage) , i.firm i.year

Where should I put the interaction term, inside the parenthesis or outside the parenthesis? If outside, I am concerned that the error terms would be brought back to the second stage. If inside, should it be :
xtivreg dependentvariable (instrument instrumentXcontrol= predictors of the first stage), i.firm i.year

Your advice will be very appreciated. Thank you.

Kun
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