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IVREG2H: Stata module to perform instrumental variables estimation using heteroskedasticity-based instruments

Author

Listed:
  • Christopher F Baum

    () (Boston College
    DIW Berlin)

  • Mark E Schaffer

    () (Heriot-Watt University)

Abstract

ivreg2h estimates an instrumental variables regression model providing the option to generate instruments using Lewbel's (J.Bus.Ec.Stat., 2012) method. This technique allows the identification of structural parameters in regression models with endogenous or mismeasured regressors in the absence of traditional identifying information, such as external instruments or repeated measurements. Identification is achieved in this context by having regressors that are uncorrelated with the product of heteroskedastic errors, which is a feature of many models where error correlations are due to an unobserved common factor. Using this form of Lewbel's method, instruments may be constructed as simple functions of the model's data. This approach may thus be applied when no external instruments are available, or, alternatively, used to supplement external instruments to improve the efficiency of the IV estimator. Supplementing external instruments can also allow Sargan-Hansen tests of the orthogonality conditions or overidentifying restrictions to be performed, which would not be available in the case of exact identification by external instruments.

Suggested Citation

  • Christopher F Baum & Mark E Schaffer, 2012. "IVREG2H: Stata module to perform instrumental variables estimation using heteroskedasticity-based instruments," Statistical Software Components S457555, Boston College Department of Economics, revised 18 Feb 2018.
  • Handle: RePEc:boc:bocode:s457555
    Note: This module should be installed from within Stata by typing "ssc install ivreg2h". Windows users should not attempt to download these files with a web browser.
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    File URL: http://fmwww.bc.edu/repec/bocode/i/ivreg2h.ado
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    File URL: http://fmwww.bc.edu/repec/bocode/i/ivreg2h.sthlp
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    File URL: http://fmwww.bc.edu/repec/bocode/u/UK12_baum.pdf
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