st: ivreg2: interacting the endogenous regressor

[Jana von Stein <janavs@umich.edu>]

Hi -- thanks for the idea, Kit (Go Blue!). Unfortunately, even decent  
instruments are very hard to find. Essentially, I am trying to test  
whether the effect of the instrumented variable depends on the values  
that the variable x1 takes on. Is there some way to do this that  
doesn't involve trying to find a second instrument (which is near- 
impossible)? I've split x1 into "low" and "high" and run separate  
regressions, but that doesn't allow cross-estimation comparisons, right?

many thanks,
Jana
On May 23, 2012, at 5:52 AM, Christopher Baum wrote:

> <>
> On May 23, 2012, at 8:33 AM, Jana wrote:
>
> > I need to interact my endogenous variable (for which I'm
> > instrumenting) with one of the exogenous variables in my step2
> > equation. Is there a straightforward way to do this using ivreg2? I'm
> > reluctant to do it by hand because I'm not certain whether the
> > standard errors would be right; I am also a bit of a novice on iv
> > regression and so would like to be able to take advantage of ivreg2's
> > already-programmed post-estimation tests, etc.
>
> You need an additional instrument to do that: if you have y2 and  
> x1*y2 in the regression (y endog, x exog) you need to form the  
> instruiments
> (z1 z1*x1), where z1 is the excluded instrument. If z1 is an  
> appropriate instrument, and x1 is truly exogenous, then the product  
> of z1*x1 will also be
> exogenous.
>
> Go Blue!
>
> Kit Baum
> co-author ivreg2
>
>
> 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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