I am new to using xtivreg2 - and have a question. Sorry if this has been addressed before.
My question is on 2SLS regression with panel data. I am interested in estimating an interaction effects model with one endogenous regressor (X1) and two endogenous regressors X2 and X3
Y = X1 + X1* X2 + X1* X3 + controls1
X1 is endogenous X2 and X3 are exogenous Controls1- set of controls to explain Y
And X1= Z+ controls2 Controls2 – set of controls to explain X1
Right now I am doing it 2SLS by hand, by predicting X1hat and sticking it in the equation for Y. I am concerned that this may not be the right way to do it.
Based on some material I have seen on Stata forums, I understand that I have to instrument X1*X2 by Z*X2.. and in essence estimate this model as a multiple endogenous regressor model.
Thanks for your help in advance,