Questions tagged [2sls]
Two-stage least squares is a regression technique from econometrics used in instrumental variables analysis.
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questions
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17 views
IV Estimator or 2SLS estimator?
I am estimating the causal effect of maternal education on child health outcomes (as measured by the hight for age, weight for age z scores as well as their breastfeeding status measured by a binary ...
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0answers
16 views
What is the effect of an omitted variable in the first stage of an IV/2SLS
Background
Let me start with the fact that I read, this post, this post and this post. These questions deal with omitting exogenous variables from the main equation in the first stage. My question is ...
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1answer
900 views
Bivariate probit versus 2SLS, contradictory results (sign)
I am currently facing puzzle and I hope some of you will be able to provide me some insights. I have this model: y: binary variable, x1: binary variable (endogenous), z: binary instrument, x2: ...
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0answers
17 views
2stage (instrumental variable) analysis: is reverse causality in the first stage a problem? [duplicate]
For my research I am looking into the relationship between an outcome (Y) and a predictor (X) as follows:
$$Y = X + e$$
where $e$ is the error term.
Because there might be reverse causality I am ...
1
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0answers
12 views
Two-stage residual inclusion or two-stage predictor substitution
I am a beginner on this site, so my apologies if I ask something incorrectly here.
I have a panel dataset that looks like this:
Ultimately, I need to estimate the predictors of patient quality of ...
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1answer
228 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 ...
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0answers
9 views
Testing for instrument validity using control function approach
Suppose we have a linear IV model with: $$ y_i=\beta x_i + \epsilon_i$$ $$x_i=\gamma z_i + u_i $$with $E(x_i \epsilon_i)\neq 0$ and $E(z_i \epsilon_i)=0$.
Then we can estimate the residuals in the ...
2
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1answer
11 views
Can I use same Instrumental variable for two of my endogenous variables?
I have the following model :
y= X1+x2+X1*X2+ other control
both X1 and X2 are endogenous. Can I use the same instrument for both X1 and X2?
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1answer
4k views
2SLS but second stage Probit
I am trying to use instrumental variables analysis to infer causality with observational data.
I have come across a two-stage least squares (2SLS) regression which is likely to address the ...
3
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0answers
88 views
2SLS with a boolean regressor
So, I have the following linear model:
$$y = \alpha + \beta x + u$$
and $x \in \{0,1\}$, i.e. the variable $x$ is boolean. Moreover $x$ may be endogenous, and I have a set of instrumental variables $\...
0
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1answer
17 views
How do you prove that an IV estimator is (in general) inconsistent if the first stage regression does not include a constant?
Given an equation
$$
Y = \alpha + \beta X + u
$$
where $X$ is an endogenous variable and $Z$ is a valid instrument for $X$.
Then suppose that
$$
X = \gamma + \pi Z + v
$$
is the true data generating ...
3
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1answer
522 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 ...
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0answers
67 views
Instrument variable that indirectly related to the error term. Valid?
I try to grasp the concept of instruments in 2SLS regressions.
I have a variable that is correlated with an endogenous regressor (informative). I also believe that it is uncorrelated with the error ...
0
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2answers
161 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 ...
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15 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 ...
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2answers
54 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 ...
2
votes
1answer
44 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 ...
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0answers
84 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
112 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
45 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
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1answer
62 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
$$E[Y_1-Y_0|D_1 = 1, D_{0} = 0] =...
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1answer
62 views
Using residuals in 2SLS regression to remove reverse causality
Someone suggested the following idea to me to control for reverse causality. Suppose we want to test for the effect of $X$ on $Y$ in a panel data set, but we suspect that there is reverse causality. ...
0
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1answer
57 views
Test for weak instruments in Stata when using VCE robust [closed]
does anyone know how I can test for weak instruments (one instrument, just identified model) after 2SLS regression in Stata when using robust standard errors (VCE robust)?
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1answer
416 views
A 2SLS when the instrumented variable has two interactions in the model
I am using ivreg and ivmodel in R to apply a 2SLS.
I would like to instrument one variable, ...
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0answers
12 views
How to properly use IV regression when my endogenous variable is a ratio?
I’m trying to better understand the issues relevant to the selection of an instrumental variable for a project I’m working on (and also more generally). In a recent example I ran into, my endogenous ...
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0answers
40 views
Instrumental variables: Fixed effects only in the second stage?
I have been under the impression that for a 2SLS FE model you got to have the fixed effects in both stages. So if you have a time invariant instrument you can forget about your FE, as they already ...
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votes
1answer
6k views
2SLS with endogenous interaction term
I am trying to estimate a peer effects model where a certain characteristic of the individual and the peers might be endogenous:
$$\ y_i=\alpha + \beta_1 Controls_i + \gamma_1 Endog_i +\gamma_2 \...
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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
144 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 ...
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0answers
45 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, $E[X_t\epsilon_t]\ne 0$....
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1answer
1k 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 ...
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0answers
77 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 ...
6
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2answers
9k views
Weak first stage in 2SLS
I have a simple IV model with 1D variables:
$N = \alpha_z + \beta_z Z + \epsilon_z$
$S = \alpha_s + \beta_s N + \epsilon_s$
$N$ is an integer, while $S$ is dummy.
$Z$ is by construction ...
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1answer
2k views
Can there be endogeneity?
I am performing a regression in which I suspect there could be endogeneity between the main explanatory variable and the dependent. As a first step I perform an OLS regression and then, to control for ...
6
votes
1answer
310 views
Are There Evaluation Criteria For Instrumental Variables?
If theory points to multiple possible instruments that can be used, how can I choose which one of them is the best for 2SLS?
I read that good instrument should be significant and correlated with the ...
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0answers
332 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 ...
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0answers
21 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\...
0
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1answer
333 views
2SLS for sales data (problem with IV)
I am given a task to perform an analysis on marketing data and to find out if the prices for the products and marketing budget are set correctly.
In order to do it, I need to find a suitable model ...
4
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2answers
4k views
Why do you put all the exogenous variables into the first and second stage of 2SLS?
For a general MLR, let's say we have k endogenous X's, r exogenous W's, and m instruments.
The first stage of the 2SLS model is regressing each of the endogenous X's on all the Z's and W's. For the ...
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3answers
51k views
Two stage models: Difference between Heckman models (to deal with sample selection) and Instrumental variables (to deal with endogenity)
I am trying to get my head around the difference between sample selection and endogeneity and in turn how Heckman models (to deal with sample selection) differ from instrumental variable regressions (...
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0answers
203 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 ...
3
votes
1answer
900 views
Why use two stage least squares for the instrumental variable estimator?
Following the rationale from Econometric Methods with Applications in Business and Economics by Heij et al., the instrumental variables estimator $b_{IV}$ for the linear regression model
$y = X\beta ...
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0answers
45 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
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1answer
83 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 ...
3
votes
1answer
14k views
Basic 2SLS IV Questions in Stata
(1) If I believe my instrument is exogenous conditional upon a few exogenous variables, do I include them only in the first stage? I.e. would the command be:
...
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0answers
140 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?
3
votes
1answer
445 views
Heterogeneous treatment effects with 2SLS local average treatment effect (LATE)
I am interested in a strategy to calculate heterogeneous treatment effects with an IV strategy for local average treatment effects (LATE).
I am estimating the effect of postsecondary educational ...
1
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0answers
68 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 ...
3
votes
1answer
85 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 ...