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Estimation of Models with Grouped and Ungrouped Data by Means of 2SLS

Author

Listed:
  • Phoebus J. Dhrymes

    (Columbia University)

  • Adriana Lleras-Muney

    (Princeton University)

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. By estimating the first stage using the available individual data, and then estimating the second stage at the aggregate level, it might be possible to gain efficiency relative to the OLS and 2SLS estimators that use only grouped data. We term this the Mixed- 2SLS estimator (M2SLS). The M2SLS estimator is consistent and asymptotically normal. We also provide a test of efficiency of M2SLS relative to OLS and 2SLS estimators.

Suggested Citation

  • Phoebus J. Dhrymes & Adriana Lleras-Muney, 2004. "Estimation of Models with Grouped and Ungrouped Data by Means of 2SLS," Working Papers 251, Princeton University, Woodrow Wilson School of Public and International Affairs, Center for Health and Wellbeing..
    • Handle: RePEc:pri:cheawb:31
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    More about this item

    Keywords

    Two-stage least squares; instrumental variables; grouped data; mixed two stage least squares; test of efficiency;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation

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