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

[David Torres <writeon4truth2@msn.com>]

Thanks so much, Vidhya.  It's nice to know I was on the right track.
D


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> Date: Wed, 31 Jul 2013 19:32:51 -0400
> Subject: Re: st: Interactions using -xtivreg- Instrumental Variables estimation
> From: vidhyahere@gmail.com
> To: statalist@hsphsun2.harvard.edu
>
> 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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