# Questions tagged [two-stage-least-squares]

Two-stage least squares (2SLS) is a structural equation modeling technique that is used when the IV is correlated with the DV's errors.

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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 ...
132 views

### Does an instrumental variable require independence between the instrument and treatment?

An instrumental variable Z is a legitimate instrument for T (the treatment) if the following hold: Z has a causal effect on Y that is fully mediated by T (i.e. no direct effect from Z to Y, and the ...
10 views

### 2SLS: does it just rescale the instrument variable?

I am investigating using instrument variables to correct for some known sources of measurement error in my data (measures that reflect mistakes/inconsistencies that we think directly affect our main ...
30 views

### Do first and second stage regressions combined with fixed effects have to follow the same model?

I suspect reverse causality between Y and X1, therefore I'm applying an instrumental variable approach to panel data. My main regression consists of country- and year-fixed effects. Do I have to also ...
1 vote
660 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 ...
96 views

### Instrumental variable with measurement error

I have a question related to measurement error bias and the use of instrumental variables. Assume I have a continuous outcome variable $Y$ which is observed with no error and an endogenous (continuous)...
1 vote
143 views

### Weak instrument but 2nd stage significant

My IV's 1st stage F-stat is 4.7 (considered weak by the rule of thumb). The 2nd-stage regression coefficient is significant. I wonder what is the best way to interpret such observations.
306 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 ...
442 views

### Manually calculate robust standard errors of 2SLS regression

I used the "systemfit" function in R to estimate a 2SLS model as it allows to specify the first and second stage separately which is important for my estimation. I need robust standard ...
1 vote
2k 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: ...
503 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 ...
2k views

35 views

### What is a 2-stage estimator?

I thought I would quickly find the answer to this, and maybe my capabilities of using the sites search function are very poor, but I didn't find an answer to the definition of what a 2-stage estimator ...
1 vote
138 views

### warning: variance matrix is nonsymmetric or highly singular [closed]

I get the above warning when running a 2SLS regression in Stata with robust standard errors. Specifically, I get this for the first stage, where in addition the first stage has no F-statistic, p-value,...
55 views

### Temporal Order of Control Variables in 2SLS

I am analyzing pooled cross-sectional data with the instrumental variable being educational policy, the independent variable as high school graduation, and the dependent variable as subjective class ...
46 views

### Estimating Complier Average Causal Effect (CACE) in a Field Experiment with One-Sided Noncompliance

I am working on a referee report for a field experiment focused on the employment process. The experiment investigates if including a video in job applications can reduce employment disadvantages for ...
1 vote
18 views

### 2sls with interaction terms

I am running 2sls. Dependent variable - y Independent variable - x Instrumental variables - z1, z2, z3, z4 Interaction terms - xz1, xz2, xz3, xz4 Control variables Thus, the first stage of 2sls: x ...
1 vote