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2SLS Mroz

This document discusses the use of two-stage least squares (2SLS) to estimate simultaneous equation systems. It shows the results of using 2SLS to estimate a labor supply equation, where wage is treated as endogenous and instrumented using experience and education variables. It then estimates a labor demand equation, instrumenting hours worked using demographic variables. Both estimations pass identification and validity tests. The document directs the reader to other examples demonstrating 2SLS for simultaneous systems.

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симона златкова
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45 views2 pages

2SLS Mroz

This document discusses the use of two-stage least squares (2SLS) to estimate simultaneous equation systems. It shows the results of using 2SLS to estimate a labor supply equation, where wage is treated as endogenous and instrumented using experience and education variables. It then estimates a labor demand equation, instrumenting hours worked using demographic variables. Both estimations pass identification and validity tests. The document directs the reader to other examples demonstrating 2SLS for simultaneous systems.

Uploaded by

симона златкова
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Simultaenous Systems and 2SLS Thursday November 8 15:45:39 2012 Page 1

___ ____ ____ ____ ____(R)


/__ / ____/ / ____/
___/ / /___/ / /___/
Statistics/Data Analysis

User: Prof. Erdinc, ECO 311


Project: Simultaenous Systems and 2SLS{space -7}

name: <unnamed>
log: C:\Users\didar\Desktop\ECO 311\2SLSEstimation_MROZ.smcl
log type: smcl
opened on: 8 Nov 2012, 15:39:00

1 . ivreg2 hours (lwage= exper expersq) educ age kidslt6 nwifeinc

IV (2SLS) estimation

Estimates efficient for homoskedasticity only


Statistics consistent for homoskedasticity only

Number of obs = 428


F( 5, 422) = 3.44
Prob > F = 0.0046
Total (centered) SS = 257311019.9 Centered R2 = -2.0076
Total (uncentered) SS = 983895094 Uncentered R2 = 0.2134
Residual SS = 773893123.1 Root MSE = 1345

hours Coef. Std. Err. z P>|z| [95% Conf. Interval]

lwage 1639.556 467.2656 3.51 0.000 723.7318 2555.379


educ -183.7513 58.68409 -3.13 0.002 -298.77 -68.73257
age -7.806092 9.312048 -0.84 0.402 -26.05737 10.44519
kidslt6 -198.1543 181.6424 -1.09 0.275 -554.1669 157.8583
nwifeinc -10.16959 6.568215 -1.55 0.122 -23.04306 2.703873
_cons 2225.662 570.5226 3.90 0.000 1107.458 3343.866

Underidentification test (Anderson canon. corr. LM statistic): 18.164


Chi-sq(2) P-val = 0.0001

Weak identification test (Cragg-Donald Wald F statistic): 9.329


Stock-Yogo weak ID test critical values: 10% maximal IV size 19.93
15% maximal IV size 11.59
20% maximal IV size 8.75
25% maximal IV size 7.25
Source: Stock-Yogo (2005). Reproduced by permission.

Sargan statistic (overidentification test of all instruments): 0.862


Chi-sq(1) P-val = 0.3531

Instrumented: lwage
Included instruments: educ age kidslt6 nwifeinc
Excluded instruments: exper expersq

2 .
3 . *// Note that the labor supply is estimated instrumenting the endogenous lwage with exper and
> (from the demand equation), and the sargan confirms that the instruments are valid with p>alp

4 . *// Now is the time for estimating the demand for labor using the instruments from the supply
> .

5 . ivreg2 lwage (hours=age kidslt6 nwifeinc) educ exper expersq

IV (2SLS) estimation

Estimates efficient for homoskedasticity only


Statistics consistent for homoskedasticity only

Number of obs = 428


F( 4, 423) = 19.03
Prob > F = 0.0000
Total (centered) SS = 223.3274409 Centered R2 = 0.1257
Total (uncentered) SS = 829.5947861 Uncentered R2 = 0.7646
Residual SS = 195.2655578 Root MSE = .6754
Simultaenous Systems and 2SLS Thursday November 8 15:45:39 2012 Page 2

lwage Coef. Std. Err. z P>|z| [95% Conf. Interval]

hours .0001259 .0002531 0.50 0.619 -.0003702 .000622


educ .11033 .0154334 7.15 0.000 .0800811 .1405789
exper .0345824 .0193774 1.78 0.074 -.0033966 .0725613
expersq -.0007058 .0004514 -1.56 0.118 -.0015905 .000179
_cons -.6557254 .3358094 -1.95 0.051 -1.3139 .002449

Underidentification test (Anderson canon. corr. LM statistic): 13.175


Chi-sq(3) P-val = 0.0043

Weak identification test (Cragg-Donald Wald F statistic): 4.457


Stock-Yogo weak ID test critical values: 5% maximal IV relative bias 13.91
10% maximal IV relative bias 9.08
20% maximal IV relative bias 6.46
30% maximal IV relative bias 5.39
10% maximal IV size 22.30
15% maximal IV size 12.83
20% maximal IV size 9.54
25% maximal IV size 7.80
Source: Stock-Yogo (2005). Reproduced by permission.

Sargan statistic (overidentification test of all instruments): 2.925


Chi-sq(2) P-val = 0.2316

Instrumented: hours
Included instruments: educ exper expersq
Excluded instruments: age kidslt6 nwifeinc

6 . *// Note that we have used the exo variables (those which help us identify the demand equatio
> y included in the supply equation) as instruments for the endo variable lwage in the demand e

7 . *// See related data and examples 16.6, 16.7, and 16.8 (panel case) for further economic appl
> of simultaenous equation systems and the application of 2SLS method.

8 . log close
name: <unnamed>
log: C:\Users\didar\Desktop\ECO 311\2SLSEstimation_MROZ.smcl
log type: smcl
closed on: 8 Nov 2012, 15:44:56

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