IV/2SLS models

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IV/2SLS models
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Zi1
Zi0
?10.57
?00.80
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?03186
?13278
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Right hand term is (1/F) for the null
hypothesis That the coefficients in the 1st stage
are all zero
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?1
?o
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?iv (?1 - ?0)/(?1 - ?0) -487.8/0.159
3067.9 CPI78 65.2 CPI8190.9 65.2/90.9
.7173 .7173067.92 2199
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Correlation coefficient
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OLS of bivariate model
IV of bivariate Model (Wald Est)
0.0020246/0.0291243 0.0695
Ratio of std errors should equal corr coef From
previous page
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First stage regression with two instruments
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Notice t-stat on Reduced form Is almost the same
As t-stat in 2SLS 0.12/.028 4.285
IV estimate -0.0083481/0.0694 -0.12031
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LIST OF EXOGENOUS VARIABLES ALL VARIABLES NOT IN
LIST ARE CONSIDERED ENDOGENOUS
STRUCTURAL MODEL
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2SLS by IVREGRESS
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2SLS Worked for Pay Model, 2 instruments
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Can reject at 5.1 percent the null the
coefficients are The same
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R2 is useless because of Rounding must
calculate yourself
Output residuals from 2LSL model
Regress on all exo factors
Get test of overid by brute force
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• SSM 1.467
• SST 60444.5
• R2 SSM/SST 2.43E-5
• N 254654
• NR2 6.18
• Dist as ?2(1)
• P-value of 6.18 is 0.0129

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Example

• Suppose a school district requires that a child
  turn 6 by October 31 in the 1st grade
• Has compulsory education until age 18
• Consider two kids
• One born Oct 1, 1960
• Another born Nov 1,1960

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• Oct 1, 1960
• Starts school in 1966 (age 5)
• Turns 6 a few months into school
• Starts senior year in 1977 (age 16)
• Does not turn 18 until after HS school is over
• Nov 1, 1960
• Start school in 1967 (age 6)
• Turns 7 a few months into school
• Starts senior year in 1978 (age 17)
• Turns 18 midway through senior year

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Ratio of Std errors is 0.0003386/0.0239
0.0125 AbsRho(qob1,educ) 0.0142
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The number you get
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First-stage
Reduced-forms
-0.0110989/-0.1088179.101995
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Wald Estimate
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OLS, Table V, Column (1)
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