Estimation of models with grouped and ungrouped data by means of "2SLS"

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Estimation of models with grouped and ungrouped data by means of "2SLS"

Author Info

Phoebus J. Dhrymes () (Columbia University - Department of Economicss)
Adriana Lleras-Muney () (Princeton University - Woodrow Wilson School of Public and International Affairs)

Abstract

This paper deals with a special case of estimation with grouped data, where the dependent variable is only available for groups, whereas the endogenous regressor(s) is available at the individual level. In this situation, the solution adopted by researchers is to aggregate the individual data and then use standard 2SLS estimation. However when some data is available at the individual level, it might be possible to gain efficiency by estimating the first stage using the available individual data, and then estimating the second stage at the aggregate level. This estimation procedure yields a consistent and asymptotically normal estimator that we refer to as Mixed-2SLS. Depending on the parametric configuration of the model, the Mixed-2SLS estimator can be more or less efficient than standard 2SLS. The standard 2SLS estimator of this literature is asymptotically equivalent to the OLS estimator based on group data alone. A number of simulations are carried out that illustrate or confirm theoretical findings.

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Paper provided by Columbia University, Department of Economics in its series Discussion Papers with number 0102-66.

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Length: 40 pages
Date of creation: 2002
Date of revision:
Handle: RePEc:clu:wpaper:0102-66

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Dickins, William T, 1990. "Error Components in Grouped Data: Is It Ever Worth Weighting?," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 328-33, May. [Downloadable!] (restricted)
Dee, Thomas S., 1999. "State alcohol policies, teen drinking and traffic fatalities," Journal of Public Economics, Elsevier, vol. 72(2), pages 289-315, May. [Downloadable!] (restricted)
Lara Shore-Sheppard, 1996. "The Precision of Instrumental Variables Estimates With Grouped Data," Working Papers 753, Princeton University, Department of Economics, Industrial Relations Section.. [Downloadable!]
repec:fth:prinin:374 is not listed on IDEAS
Caroline Hoxby & M. Daniele Paserman, 1998. "Overidentification Tests with Grouped Data," NBER Technical Working Papers 0223, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)

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