Re: st: Interactions using -xtivreg- Instrumental Variables estimation

[Vidhya Soundararajan <vidhyahere@gmail.com>]

Hi David,

That is correct. You typically include your interact your instruments
with the same variables as the endogenous variables are interacted
with. Unless of course you have other non-interacted instruments as
well, which can be added to the list.

I think thought you need to manually generate these interacted
variables (both endogenous and instruments) and include them. I do not
think STATA accepts interaction operators in its list of endogenous
regressors or instruments (may be newer version do, I may be wrong).

What is forbidden in this case though is "the forbidden regression" -
see Wooldridge (2000), Econometric Analysis of Cross Section and Panel
Data, section 9.5, esp. pp. 236-7 and a similar earlier question on
statalist - http://www.stata.com/statalist/archive/2003-11/msg00795.html.
There are many more similar questions like this on statalist and
useful discussions surrounding this, as well that can help you

Best,
Vidhya


On Wed, Jul 31, 2013 at 7:11 PM, David Torres <writeon4truth2@msn.com> wrote:
>
> I'm still hoping someone can answer the question below, which I sent yesterday.
>
> >
> > Hello, all,
> >
> > So I'm using an instrumental variables approach with two-level data using Stata's -xtivreg- command. My single IV relates to a level-one time-varying variable. I'd like to include interactions between the level one variable and dummies at level two denoting sex and race/ethnicity.
> >
> > How is this done? Do I produce interactions between the instrument and my dummies, as well as between the variable being instrumented for and my dummies, and then simply insert everything in my model like this:
> >
> > xtivreg mathsc year male black hispan othrace (var1 var1*male var1*black var1*hispan var1*othrace = instrument instrument*male instrument*black instrument*hispan instrument*othrace), re
> >
> > or should I be setting the model up differently?
> >
> > Thanks in advance for your help.
> >
> >
> >
> > *
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> *
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*
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