IV/2SLS models
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IV/2SLS models
Zi=11=0.57Zi=00=0.80
0=31861=3278
Right hand term is (1/F) for the null hypothesisThat the coefficients in the 1st stage are all zero
1o
iv= (1 - 0)/(1 - 0) = -487.8/0.159 = $3067.9
CPI78 = 65.2 CPI81=90.9 65.2/90.9 = .7173
.717*3067.92 = $2199
Chart1
31.8
32.3
33.3
34
34.1
33.9
34.2
35.4
36.4
36.5
36.9
37.1
37.6
38
37.8
38.3
38.9
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40.1
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41.6
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43.3
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43.7
44.4
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46
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57.9
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60.7
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60.5
60.6
60.3
Year
Percent in labor force
Female Labor Force Paticipation Rate
female_lfp
194831.8
194932.3
195033.3
195134
195234.1
195333.9
195434.2
195535.4
195636.4
195736.5
195836.9
195937.1
196037.6
196138
196237.8
196338.3
196438.9
196539.4
196640.1
196741.1
196841.6
196942.7
197043.3
197143.3
197243.7
197344.4
197445.3
197546
197647
197748.1
197849.6
197950.6
198051.3
198152.1
198252.7
198353.1
198453.7
198554.7
198655.5
198756.2
198856.8
198957.7
199058
199157.9
199258.5
199358.5
199459.3
199559.4
199659.9
199760.5
199860.4
199960.7
200060.6
200160.6
200260.5
200360.6
200460.3
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Correlation coefficient
0.0020246/0.0291243= 0.0695OLS of bivariate modelIV of bivariateModel (Wald Est)Ratio of std errors should equal corr coefFrom previous page
First stage regression with two instruments
IV estimate-0.0083481/0.0694= -0.12031Notice t-stat on Reduced formIs almost the same As t-stat in 2SLS
0.12/.028 = 4.285
STRUCTURAL MODELLIST OF EXOGENOUS VARIABLESALL VARIABLES NOT IN LISTARE CONSIDERED ENDOGENOUS
2SLS by IVREGRESS
2SLS Worked for Pay Model, 2 instruments
Can reject at 5.1 percent the null the coefficients areThe same
Output residuals from 2LSL modelRegress on all exo factorsR2 is useless because ofRounding must calculateyourselfGet test of overid by brute force
SSM = 1.467SST = 60444.5R2 = SSM/SST = 2.43E-5N = 254654NR2 = 6.18Dist as 2(1) P-value of 6.18 is 0.0129
ExampleSuppose a school district requires that a child turn 6 by October 31 in the 1st gradeHas compulsory education until age 18Consider two kidsOne born Oct 1, 1960Another born Nov 1,1960
Oct 1, 1960Starts school in 1966 (age 5)Turns 6 a few months into schoolStarts senior year in 1977 (age 16)Does not turn 18 until after HS school is overNov 1, 1960Start school in 1967 (age 6)Turns 7 a few months into schoolStarts senior year in 1978 (age 17)Turns 18 midway through senior year
Ratio of Std errors is 0.0003386/0.0239 = 0.0125Abs[Rho(qob1,educ)] =0.0142
The number you get
First-stageReduced-forms-0.0110989/-0.1088179=.101995
Wald Estimate
OLS, Table V, Column (1)