Questions tagged [2sls]
Two-stage least squares is a regression technique from econometrics used in instrumental variables analysis.
121
questions
2
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2answers
62 views
What does it mean if I have a high F-stat but low $R^2$?
As far as I understand, a high F-stat leads to a high $R^2$, though the converse is not true. What does it mean if I have a high F-stat and a low $R^2$?
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0answers
11 views
Сonfidence interval mean response and prediction interval for Instrumental Variables regression
I evaluated the regression model using the 2SLS method which is presented in the ivreg R package.
Using predict can get fitted ...
1
vote
2answers
34 views
Can I use an exogenous variable from my model as an instrumental variable?
Can I use an exogenous variable specified in my model as an instrument for an endogenous one?
It can be reasoned that there is a relationship between the two.
My conjecture is this:
Given that the ...
1
vote
0answers
17 views
Which F statistic is generated in felm (R) and why does it differ from STATA (ivreghdfe)
I'm running 2sls and making sure that my results replicate in both stata and r. In r, using felm, my code is:
...
1
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1answer
32 views
Non-statistically significant effect of the instrument in the reduced form of the 2SLS
I am using a 2SLS, with two endogenous variables and two instruments.
I conduct the Under- and the Weak-identification tests; results from these tests suggest that my instruments are not weak.
...
2
votes
1answer
38 views
When endogenous variable is non-normally distributed
I am trying to fit an IV probit model with my dependent variable being binary. However, my endogenous variable is a "ratio" variable, which is not normally distributed, thereby preventing me ...
1
vote
1answer
22 views
Why is the Wald Estimator equal to LATE (binary instrument)?
In Mostly Harmless Econometrics, Equation (4.1.12) states that in IV setting with binary instrument $Z$, treatment $D$, and potential outcomes $Y_1,Y_0$ for $Y$, then
$$E[Y_1-Y_0|D_1 = 1, D_{0} = 0] =...
0
votes
1answer
28 views
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)?
2
votes
1answer
27 views
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. ...
2
votes
1answer
169 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, ...
0
votes
0answers
8 views
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 ...
2
votes
1answer
21 views
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 ...
0
votes
0answers
19 views
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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0answers
10 views
Social-Network Peer Effect Regression
I have locally transformed model from Bramoullé 2009 to be estimated for regression estimation $\begin{equation}
( \mathrm{{I}} - {G}_{l}^{*}){y}_{l} = \beta_2( \mathrm{{I}} - {G}_{l}^{*}) {G}_{l}^...
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0answers
14 views
Addressing Near Perfect Correlations In Highly Competitive Commodity Markets
I am working on an analysis for a highly competitive agriculture market. I'm looking at county elevators in Iowa where competitors set their price for tomorrow's corn "ask" the evening before, but ...
0
votes
1answer
72 views
Missing R squared value from STATA output, what does that mean?
I ran a 2SLS regression in STATA, and there is no R squared value given in the output (only a dot where the value should be). What could this be interpreted as? Is it missing because it may be a ...
1
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0answers
36 views
How do I tell if my Instrument is valid?
I have the following structural model (similar) which I wish to estimate
$$
Y_t = \beta_0 + \beta_1 X_t + \epsilon_t
$$
but I'm aware that $X_t$ is endogenous or equivalently, $E[X_t\epsilon_t]\ne 0$....
0
votes
0answers
16 views
Simplifying last step of IV estimator derivation with matrices
I've been reading about IV in this textbook. On page 39 (page 5 of the PDF), I'm confused by the last step.
How does [(z'z)^(-1)z'y]/[(z'z)^(-1)z'x] simplify to (z'x)^(-1)z'y?
I can see that the (...
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votes
0answers
10 views
Estimating post treatment outcome of IV
In the Angrist, Mastering metrices book (page 118, chapter 3, Instrumental variable)
Angrist calculated "recidivism was
greater among suspects assigned to be coddled than among those
assigned to be ...
1
vote
0answers
59 views
Why do estimates differ so much between Instrumental Variable (ivreg) vs 2SLS (lm)?
I am working with some messy pilot data to figure out whether Instrumental Variable analysis will help interpret the results of a randomized controlled trial I am preparing. Treatment compliance in ...
0
votes
0answers
28 views
Interpretation of Hausman test - IV models
I ran two IV models:
1) ivreg 2sls y x1 (x2=z1)
2) ivreg 2sls y x1 (x2=z1 z2)
than I did a Hausman test, and it was not significant, so I could not reject the null. What does that mean? Is z2 a valid ...
0
votes
0answers
13 views
How to decide which variables belong in the first and second stage of the 2SLS method
Let's assume I want to estimate the model:
Income = Education + Gender + u
Let's say I would like to use the occurrence of two events with ...
0
votes
0answers
16 views
How apply 2SLS in order to find estimates of the SEM's model , provided that the lag values of the variables are used?
How should I apply 2SLS in order to find estimates of the model of a system of simultaneous equations, provided that the lag values of the variables are used?
For example, there is the following ...
0
votes
0answers
27 views
Explaining instrumental variable 2SLS in a simple yet precise way
I am trying to explain IV 2SLS in a non-technical yet precise way. However, I still think I can improve, and I would highly appreciate input that could make some points clearer. One of the sticking ...
7
votes
0answers
203 views
Instrumental variables with interactions between endogenous variables
I have two endogenous variables $x_1$ and $x_2$ and am trying to estimate the following model:
$$y = \theta_0 + \theta_1 x_1 + \theta_2 x_2 + \theta_{12} x_{12}$$
where $x_{12} = x_1\times x_2$. I'm ...
1
vote
1answer
722 views
What control variables do we need for IV regression?
I am running and IV regression and I need help on what control variables to include in the IV regression. I believe that I have to control for potential variable that are correlated with both the ...
0
votes
0answers
19 views
Implementation of 2SLS in regression with AR errors?
Consider the following simple example:
$Y_t=\beta X_{t-1}+\varepsilon_t$
$X_t=\gamma Y_t + Z_t +u$,
where
$\varepsilon_t=\alpha\varepsilon_{t-1}+\eta$,
and $E[Z_t\varepsilon_t']=E[uu']=E[\eta\...
1
vote
0answers
120 views
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 ...
1
vote
0answers
43 views
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 ...
0
votes
1answer
64 views
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 ...
1
vote
0answers
108 views
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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0answers
65 views
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 ...
2
votes
1answer
75 views
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 ...
0
votes
1answer
183 views
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 ...
1
vote
0answers
36 views
Interpretation of correlation in endogenous regression model
Suppose you have a linear regression with an endogenous regressor $x$ that can be represented as follows:
$x = z'\delta + \epsilon_1$
$y = \beta x + w'\gamma + \epsilon_2$
where
$\begin{pmatrix}\...
1
vote
1answer
154 views
Instrumental variables with non-normal endogenous
Does it make sense to conduct an instrumental variables model where the endogenous variable of interest is continuous but not normally distributed? I know for normal regression purposes, there is no ...
1
vote
0answers
104 views
Role of rank condition in identification of 2SLS - matrix algebra
I could write down all the steps for identification of the 2SLS estimator but my question is really a matrix algebra question which is required in the last step for finding out what the beta vector is ...
2
votes
1answer
92 views
How should an author convince readers that weak instruments are not a problem?
I see in a lot of instrumental variables papers that authors will often discuss first stage $R^2$ values or $F$ statistics to assuage concerns that they are working with a weak instrument. This seems ...
4
votes
2answers
1k views
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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0answers
1k views
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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0answers
175 views
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 ...
0
votes
1answer
46 views
mediate() vs lavaan, missing path coefficients, 2SLS does not resolve
Doing a straightforward mediation analysis, a => b => c (indirect effect) and a => c (direct effect).
If I do this in mediation::mediate(), I get
...
0
votes
2answers
149 views
2sls - instrumental variables mean and variance of exogenous variable
I do not usually use two-stage-least-square regression technique and I am not a theorist of econometrics; thus, I hope you will pardon me for this (possibly) clumsy post.
Introduction
Let's start from ...
1
vote
1answer
477 views
why is 2SLS with dummys the same as GLS on group means?
I'm reading Mostly Harmless Econometrics (Available here), and on page 100 they say that 2SLS with dummy instruments is the same as GLS on a set of group means. I don't understand why. From the ...
0
votes
1answer
1k views
What do the assumptions for 2SLS (two-stage least squares) mean in the context of instrumental variables?
The assumptions for 2SLS are (z are the vector for instrumental variables; x are the explanatory variables in the model; u are the vector for the error term):
Assumption 2SLS.1: E(z'u)=0,
Assumption ...
2
votes
1answer
2k views
Endogeneity problem in OLS
I have an OLS-model with about 30 predictor variables, from which I got both big endogeneity and heteroscedasticity problems. The variables reporting these problems also pop up in the check for ...
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0answers
155 views
Significant Predictor with a Negative Adjusted R-Squared Value: Instrumental Variables Regression
I'm running an instrumental variables regression with a single predictor on a sample size of 120.
When I run the regression, the predictor is significant at the 0.01 level, but the adjusted R-squared ...
1
vote
1answer
512 views
Is Sargan-Hansen J test relevant for panel data containing large number of observations?
I am working on a project that has 4680 observations (18 years, 265 regions), in which one variable is endogenous. We tried various combinations of two IVs, but always end up with a significant Sargan-...
1
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0answers
25 views
Why functional specification is important in RDD setting?
I'm reading Clark(2009) paper regarding the impact of education reform on school performance. The rule is that the school initiated a democratic vote at first and if 50% of students vote in favor of ...
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0answers
329 views
Simultaneous equations with interaction terms
How do you estimate the following simultaneous equation model on a panel dataset?
$Y_1=\beta_1X_1Y_2 +\beta_2X_2+e_1$
$Y_2=\alpha_1X_1Y_1 +\alpha_2 X_3+e_2$
$Y_1$ and $Y_2$ are endogenous while $...
