Instrumental Variables Method (IV) using Stata | Estimation Methods | Stata Tutorials Topic 45

Stata Tutorials Topic 45: Instrumental Variables Method (IV) using Stata | Regression Analysis and Estimation Methods Using Stata
Hi, I am Bob. Welcome to the Stata course on regression analysis and estimation methods. We will discuss obtaining the 2SLS estimates with instrumental variables in Stata. Please check out the video on the basics of the instrumental variables method before running the models. We will estimate the return to education for male workers. The dataset comes from the textbook Introductory Econometrics: A Modern Approach by Professor Jeffrey Wooldridge. You can download the data file from the link below.
Please download the dataset:
drive.google.c...
#IV #ivregress #2SLS #Stata #InstrumentalVariable #OmittedVariableBias #RegressionAnalysisandEstimationMethods #endogenous #estat
The Stata commands in this video:
*OLS
regress lwage educ exper expersq black south smsa66 reg662-reg669
estimates store OLS
*2SLS
help ivregress
*College Proximity as IV
ivregress 2sls lwage exper expersq black south smsa66 reg662-reg669 (educ=nearc4), first
display exp(.1530483)-1
estimates store IV1
esttab OLS IV1, mtitles se star(* 0.1 * 0.05 ** 0.01) b(%7.3f)
*Parent's Education as IV
egen parenteduc=rowmean(fatheduc motheduc)
ivregress 2sls lwage exper expersq black south smsa66 reg662-reg669 (educ=parenteduc), first
estimates store IV2
esttab OLS IV1 IV2, mtitles se star(* 0.1 * 0.05 ** 0.01) b(%7.3f)
*Use Both IVs
ivregress 2sls lwage exper expersq black south smsa66 reg662-reg669 (educ=nearc4 parenteduc), first
estimates store IV3
esttab OLS IV1 IV2 IV3, mtitles se star(* 0.1 * 0.05 ** 0.01) b(%7.3f)
*Postestimation Tests
estat firststage
estat endogenous
estat overid
【Some Free Courses on My KZbin Channel】
Economics in Real Life:
• Economics in Real Life
Solutions to Introductory Econometrics A Modern Approach 7th Edition:
• Solutions to Introduct...
Solutions to Microeconomics Theory and Applications with Calculus:
• Solutions to Microecon...
Introductory Stata:
• Introductory Stata (2022)
Introductory Microeconomics:
• Introductory Microecon...
Five Minute Econometrics:
• Five Minute Econometri...
Five Minute Stata:
• Stata Tutorials
【國語Mandarin】現實生活中的經濟學:
• 【Mandarin國語】現實生活中的經濟學
【粵語Cantonese】現實生活中的經濟學:
• 【Cantonese粵語】現實生活中的經濟學
【粵語Cantonese】微觀經濟學基礎:
• 粵語Cantonese微觀經濟學基礎2022
【國語Mandarin】五分鐘計量經濟學:
• 【Mandarin國語】五分鐘計量經濟學(計...
【粵語Cantonese】五分鐘計量經濟學:
• 【Cantonese粵語】五分鐘計量經濟學(...
On the Road:
• On the Road
【Become a Supporter of the channel ($2.99) to get PDF transcripts for】
1. Solutions to Microeconomics Theory and Applications with Calculus 5th Edition,
2. Solutions to Introductory Econometrics A Modern Approach 7th Edition,
3. Introductory Stata (2022),
4. Introductory Microeconomics (2022), and
5. Introductory Stata: Summary Statistics and Data Management
/ @bobwenecon

[@BobWenEcon]

9:57 the 95 percent CI of the 2SLS estimate almost covers that of the OLS estimate

[@james-7fh7r]

Hello sir, thank you for the video, very informative! I was wondering if you wanted to investigate the returns to education, for example, across the different regions in the dataset (reg662-reg669) would you divide the dataset into sub-samples or would you just include the regions as dummy variables. I am just struggling to understand if you include the regions as dummy variables how we would be able to analyse the differing in returns to education. Thanks

[@BobWenEcon]

First, reg662 to reg669 are all dummy variables. We include them in the model as control variables to keep the geographic factors fixed because they affect the outcome variable. After ruling out the regional effects, the education effect is more "pure" or ceteris paribus. Including the regions means "If we are from the same region, what is the return to education?" Second, if we want to find the return to education in different regions, we can use the subsamples for different regions. Third, if there is one dummy, say we want to find the difference in return to education between south and north, we can add the interaction term between south and education to the model.