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| Equation to be estimated | Stata command |
| .ivreg y1 x2 x3 x5 (y2 y3 = x1 x4) | |
| .ivreg y2 x3 (y1 = x1 x2 x4 x5) |
An example from Stata. The Stata manual offers the following example analysis. Assume that you want to use state level data from the 1980 census to estimate the following system of equations:
and
where hsngval is the median dollar value of owner-occupied housing; rent is the median monthly gross rent; fainc is family income; pcturban is the percent of the state population living in an urban area; and reg2 , reg3 , and reg4 are dummy variables that designate the region of the country where the state is located. In this example we focus on estimating (17).
We begin by loading the data set and describing the data.
. use http://www.stata-press.com/data/r8/hsng2
(1980 Census housing data)
.describe
| Contains data from http://www.stata-press.com/data/r8/hsng2.dta | |||||
| obs: 50 | 1980 Census housing data | ||||
| vars: 16 | 3 Sep 2002 12:25 | ||||
| size: 3,600 (99.7% of memory free) | |||||
| variable name | storage type | display format | value label | variable | label |
| state | str14 | % | 14s | State | |
| division | int | % | 8.0g | division | Census division |
| region | int | % | 8.0g | region | Region |
| pop | long | % | 10.0g | Population in 1980 | |
| popgrow | float | % | 6.1f | Pop. growth 1970-80 | |
| popden | int | % | 6.1f | Pop/sq. mile | |
| pcturban | float | % | 8.1f | Percent urban | |
| faminc | long | % | 8.2f | Median family inc., 1979 | |
| hsng | long | % | 10.0g | Hsng units 1980 | |
| hsnggrow | float | % | 8.1f | % housing growth | |
| hsngval | long | % | 9.2f | Median hsng value | |
| rent | long | % | 6.2f | Median gross rent | |
| reg1 | float | % | 9.0g | ||
| reg2 | float | % | 9.0g | ||
| reg3 | float | % | 9.0g | ||
| reg4 | float | % | 9.0g | ||
| Sorted by: state |
Now we estimate equation (17) using TSLS as shown in Figure 2.
Two-stages least square estimate of the example.
The manual continues the example to include some testing of the model including the Hausman test. Students using TSLS and IV should read the discussion in the Stata manual thoroughly.
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