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Nearly collinear robust procedures for 2SLS estimation

Author

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  • Alwyn Young

    (London School of Economics)

Abstract

Stata’s two-stage least-squares (2SLS) computation procedures are sen- sitive to near collinearity among regressors, allowing situations in which reported results depend upon factors as irrelevant as the order of the data and variables. This article illustrates this claim with the public-use data of Oreopoulos (2006, American Economic Review 96: 152–175), where the instrumented coefficient es- timate can be made to vary between 0.012 and 30.0 in one specification by per- muting the order of the variables. Different methods for improving the accuracy of 2SLS estimates are reviewed, and a Stata command for collinearity-robust 2SLS estimation is provided.

Suggested Citation

  • Alwyn Young, 2024. "Nearly collinear robust procedures for 2SLS estimation," Stata Journal, StataCorp LP, vol. 24(1), pages 93-112, March.
    • Handle: RePEc:tsj:stataj:v:24:y:2024:i:1:p:93-112
    DOI: 10.1177/1536867X241233668
    Note: to access software from within Stata, net describe http://www.stata-journal.com/software/sj24-1/st0741/
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