# Questions tagged [2sls]

Two-stage least squares is a regression technique from econometrics used in instrumental variables analysis.

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### How to interpret the coefficient from 2SLS model when the first stage outcome variable was a log transformed variable

I am estimating the following 2SLS model, and not sure how to interpret the coefficient of the second stage: The first stage: ln(X) = a0 + a1 IV + error The 2nd Stage: ln(Y) = B0 + B1 ...
1answer
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### Why including extra instrument variables in 2SLS changes my regression coefficients?

For example, when I include $A_i$ as my first instrument variable, I got the causal parameter estimate $=0.0592$ and if I included one more IV, $B_i$, my causal parameter estimate changes to $0.0505$. ...
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### Should I include interactions in the second stage of 2SLS if the 1st stage has them

I wish to estimate a standard Differences-in-differences model with a continuous treatment and a time dummy variable T: $$y = \beta_0 \cdot z + \beta_1 \cdot T + \beta_2 \cdot T \cdot z + \epsilon$$ ...
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### About post estimation test of a 2SLS

I have 2 regressors ($X_1$ and $X_2$) that I suspect be endogeneous, hence I run a 2SLS after identifying the instruments. The Wu-Hausman test reports that only $X_2$ is endogeneous, while $X_2$ is ...
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### 2SLS approach using lagged dependent variable as an instrument

I was wondering if the lagged dependent variable can be a valid instrument or not. In my data, policy intervention (x) is made depending on the outcome (y) in the past. (not depending on the effect (b)...
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### Test for weak instruments in Stata when using VCE robust [closed]

does anyone know how I can test for weak instruments (one instrument, just identified model) after 2SLS regression in Stata when using robust standard errors (VCE robust)?
1answer
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### Using residuals in 2SLS regression to remove reverse causality

Someone suggested the following idea to me to control for reverse causality. Suppose we want to test for the effect of $X$ on $Y$ in a panel data set, but we suspect that there is reverse causality. ...
1answer
582 views

### A 2SLS when the instrumented variable has two interactions in the model

I am using ivreg and ivmodel in R to apply a 2SLS. I would like to instrument one variable, ...
0answers
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### How to properly use IV regression when my endogenous variable is a ratio?

I’m trying to better understand the issues relevant to the selection of an instrumental variable for a project I’m working on (and also more generally). In a recent example I ran into, my endogenous ...
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### Inconsistency of Forbidden Regression Estimator

I am trying to prove the inconsistency of the estimator of the in the following model: 1st stage: 2nd stage: When the population model is and . I know this is a forbidden regression because ...
0answers
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### Instrumental variables: Fixed effects only in the second stage?

I have been under the impression that for a 2SLS FE model you got to have the fixed effects in both stages. So if you have a time invariant instrument you can forget about your FE, as they already ...
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### Meaning of centred and uncentered r square [closed]

I'm not sure I understand fully the meaning of centred/uncentered r2. Is uncentered r2 is same as adjusted r2? and if not, how can I know the adjusted r2? That result estimated by IV analysis. the ...
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### Instrumental variables and GARCH

Can you use the predicted value from the first stage (as estimated using 2SLS) to replace the endogenous variable in a GARCH model? Or, what would be a different way of using instrumental variables in ...
1answer
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### Is the IV approach applicable to endogenous count variable in a linear regression?

In a linear regression setting, one of the regressors (independent variables) is endogeneous. However, strictly speaking it is not continouus, but a count variable. A continouus instrumental variable ...
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### Overidentified vs just identified models

Why go with overidentified models as opposed to just-identified? If you can go with over-identified models, how many instrumental variables can you have at max in a 2SLS model?
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### 2sls asssumptions vs IV assumptions

Silly question but I was confused about the independence assumption for instrumental variables when they are used in 2SLS. Is it the case that the instrumental variable used in 2SLS only has to be as ...
1answer
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### Why the representation in the form of $Z'X(X'X)^{-1}X'Z$ can not be simplified into $Z'Z$

Representation similar to $Z'X(X'X)^{-1}X'Z$ frequently appear to e.g. 2SLS. I think that $Z'X(X'X)^{-1}X'Z = Z'XX^{-1}X'^{-1}X'Z = Z'(XX^{-1})(X'^{-1}X')Z = Z'Z$. So why it seems that in the context ...
1answer
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### Standard errors of *partial* two stage least squares coefficients

Here partial 2SLS (I coined this term and found it descriptive) is the approach that SAS uses for 2SLS. Compared to "ordinary" 2SLS which in the first stage projects all explanatory variables $X$ onto ...
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### How does IV 2SLS obtain a causal coefficient?

Despite reading and conducting several practical examples with IV 2SLS, I am still uncertain how, specifically and mathematically, 2SLS is able to obtain a causal coefficient, β, of an assumed ...
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### 2SLS Estimation for a Fuzzy Regression Discontinuity Design

I am using a Fuzzy Regression Discontinuity Design for the first time and this maybe a very basic question to some. I am estimating the Fuzzy RD with 2SLS. Suppose, my data is of the following form: ...
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### 2SLS (IV) with fractional outcome variable and spatially autocorrelated error terms

I face the challenge of estimating a 2SLS (IV) model with a fractional (ranging between 0 and 1) outcome variable and spatially autocorrelated error terms (the data is spatially explicit, i.e. for ...