# 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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### 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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### Generalised Residuals - Estimated value of the density at that point for observation $j$ $i$?

I am trying to write R code for the generalised residuals as described in Vella (1993) and also mentioned by Wooldridge (2014). Wooldridge suggests to use these ...
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### 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 ...
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### When is an instrument too strong in the first stage?

Instrumental variable regression is estimated with ivreg in R. ivreg provides diagnostics with the ...
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### Why is ignoring prediction error not a concern in instrumental variables?

In his book, Statistical Rethinking (2nd edition, p. 137), Richard McElreath states that including parameters with unobserved values, such as residuals, and treating them as if they were perfectly ...
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### 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 ...
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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 ...
• 131
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### 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 ...
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### 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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### 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 \$...
1 vote
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### 2sls with lagged dependent

I have seen many papers using dynamic panel regressions when the lagged dependent is a regressor and the data has the standard panel format. so, y(t)=constant + beta1*y(t-1)+ beta2*X(t) is often ...
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### 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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