# Tag Info

### What is the difference between two stage least squares and instrumental variable regression?

The meaning of the words first Some people use the word "IV estimator" to refer to any estimator that uses instrumental variables. To them, IV estimators contain 2SLS, LIML, k-class estimators, and ...
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### Why are my 2SLS estimates much larger than my OLS estimates?

Let me take an example based on the estimation of returns to education, which has been a well-studied problem. The usual result is that researchers find the 2SLS estimate to be larger than the OLS ...
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### What is the difference between two stage least squares and instrumental variable regression?

IV estimators are 2SLS estimators. An IV estimator is the sample analog of the form: $\beta = \frac{Cov(Y, Z)}{Cov(X, Z)}$, where $Y$ is the outcome variable, $X$ is the endogenous variable, and $Z$ ...
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### Why do we need at least as many instrumental variables as endogenous regressors to identify parameters in 2SLS?

In standard linear regression model $$y = x^\top \beta + \epsilon$$ with exogeneity $\mathbb E[x\epsilon] = \mathbf 0$ you have $K$ parameters because $\beta$ is $K \times 1$ and you have $K$ ...
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### Some confusions about instrumental variable (econometrics)

Endogenous variables are correlated with the error terms and z is correlated with endogenous variable. Doesn't this imply that z is correlated with error terms? No it doesn't. For mean-...
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### IV regression: first stage in logs, second stage in levels?

What you are describing is the so called "forbidden regression", which (in general) does not give consistent estimates. This is a summary of the notes of Ben Williams Consider a (nonlinear) ...
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### Can I instrument an endogenous variable and its quadratic form with the instrument and its quadratic form?

The reference given in a comment under the question by @Bertrand, of Cameron and Trivedi (2005, Section 6.5.4, page 198), is very useful, showing how linear 2SLS can be inconsistent. I just stress ...
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### IV Regression with More Observations for First Stage than Second Stage

You should completely omit the observations with missing data. The explanation takes a few lines, but the key fact of the first stage regression is that predicted values are uncorrelated with ...
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### The instrument in "The Colonial Origins of Comparative Development"

You should include all controls in the second stage, even if they are not instruments. The entire effect of log(mortality) should be mediated through Exprop. This does not mean there cannot be other ...
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Accepted

### Using dependent variable's and exogenous variables' lags as instruments in 2SLS

Is this legit and what is the rational behind this? Yes you will find this even as a recommendation in many textbooks (e.g. see Romer Advanced Macroeconomics pp 376) so it is legit although with a ...
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### Is it reasonable, in panel data, to use past values of explanatory variables as instruments to deal with simultaneous causality?

I suggest looking into System GMM. It is a panel regression method that uses past values as instruments and is exactly what you're looking for, I think. It has a few restrictions that much be met, the ...
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