Simultaenous Systems and 2SLS Thursday November 8 15:45:39 2012 Page 1

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Statistics/Data Analysis

User: Prof. Erdinc, ECO 311

Project: Simultaenous Systems and 2SLS{space -7}

name: <unnamed>
log: C:\Users\didar\Desktop\ECO 311\2SLSEstimation_MROZ.smcl
log type: smcl
opened on: 8 Nov 2012, 15:39:00

1 . ivreg2 hours (lwage= exper expersq) educ age kidslt6 nwifeinc

IV (2SLS) estimation

Estimates efficient for homoskedasticity only

Statistics consistent for homoskedasticity only

Number of obs = 428

F( 5, 422) = 3.44
Prob > F = 0.0046
Total (centered) SS = 257311019.9 Centered R2 = -2.0076
Total (uncentered) SS = 983895094 Uncentered R2 = 0.2134
Residual SS = 773893123.1 Root MSE = 1345

hours Coef. Std. Err. z P>|z| [95% Conf. Interval]

lwage 1639.556 467.2656 3.51 0.000 723.7318 2555.379

educ -183.7513 58.68409 -3.13 0.002 -298.77 -68.73257
age -7.806092 9.312048 -0.84 0.402 -26.05737 10.44519
kidslt6 -198.1543 181.6424 -1.09 0.275 -554.1669 157.8583
nwifeinc -10.16959 6.568215 -1.55 0.122 -23.04306 2.703873
_cons 2225.662 570.5226 3.90 0.000 1107.458 3343.866

Underidentification test (Anderson canon. corr. LM statistic): 18.164

Chi-sq(2) P-val = 0.0001

Weak identification test (Cragg-Donald Wald F statistic): 9.329

Stock-Yogo weak ID test critical values: 10% maximal IV size 19.93
15% maximal IV size 11.59
20% maximal IV size 8.75
25% maximal IV size 7.25
Source: Stock-Yogo (2005). Reproduced by permission.

Sargan statistic (overidentification test of all instruments): 0.862

Chi-sq(1) P-val = 0.3531

Instrumented: lwage
Included instruments: educ age kidslt6 nwifeinc
Excluded instruments: exper expersq

2 .
3 . *// Note that the labor supply is estimated instrumenting the endogenous lwage with exper and
> (from the demand equation), and the sargan confirms that the instruments are valid with p>alp

4 . *// Now is the time for estimating the demand for labor using the instruments from the supply
> .

5 . ivreg2 lwage (hours=age kidslt6 nwifeinc) educ exper expersq

IV (2SLS) estimation

Estimates efficient for homoskedasticity only

Statistics consistent for homoskedasticity only

Number of obs = 428

F( 4, 423) = 19.03
Prob > F = 0.0000
Total (centered) SS = 223.3274409 Centered R2 = 0.1257
Total (uncentered) SS = 829.5947861 Uncentered R2 = 0.7646
Residual SS = 195.2655578 Root MSE = .6754
 Simultaenous Systems and 2SLS Thursday November 8 15:45:39 2012 Page 2

lwage Coef. Std. Err. z P>|z| [95% Conf. Interval]

hours .0001259 .0002531 0.50 0.619 -.0003702 .000622

educ .11033 .0154334 7.15 0.000 .0800811 .1405789
exper .0345824 .0193774 1.78 0.074 -.0033966 .0725613
expersq -.0007058 .0004514 -1.56 0.118 -.0015905 .000179
_cons -.6557254 .3358094 -1.95 0.051 -1.3139 .002449

Underidentification test (Anderson canon. corr. LM statistic): 13.175

Chi-sq(3) P-val = 0.0043

Weak identification test (Cragg-Donald Wald F statistic): 4.457

Stock-Yogo weak ID test critical values: 5% maximal IV relative bias 13.91
10% maximal IV relative bias 9.08
20% maximal IV relative bias 6.46
30% maximal IV relative bias 5.39
10% maximal IV size 22.30
15% maximal IV size 12.83
20% maximal IV size 9.54
25% maximal IV size 7.80
Source: Stock-Yogo (2005). Reproduced by permission.

Sargan statistic (overidentification test of all instruments): 2.925

Chi-sq(2) P-val = 0.2316

Instrumented: hours
Included instruments: educ exper expersq
Excluded instruments: age kidslt6 nwifeinc

6 . *// Note that we have used the exo variables (those which help us identify the demand equatio
> y included in the supply equation) as instruments for the endo variable lwage in the demand e

7 . *// See related data and examples 16.6, 16.7, and 16.8 (panel case) for further economic appl
> of simultaenous equation systems and the application of 2SLS method.

8 . log close
name: <unnamed>
log: C:\Users\didar\Desktop\ECO 311\2SLSEstimation_MROZ.smcl
log type: smcl
closed on: 8 Nov 2012, 15:44:56