Dear everyone,
I am reading some papers regarding the influence of a minimum wage standard of a neighbouring municipality (j) on the minimum wage standard in municipality (i). The model that is often used is spatial auto regression (SAR) model. This is often done in this way:
The Minimum wage standard is regressed on a weighted spatial lag and a lag of various controls and fixed effects.
The issue here is that the spatial lag is endogenous. In order to deal with this, often GMM or IV is used. For IV this is done by instrumenting the spatial lag with
. This is the weighted avarage of other municipalities exogenous variables.
For GMM this is done by:
Where again the spatial lag is insturmented for by
My issue is that I would like to know how the IV and GMM should be set up in Stata as I have no idea. See a link for the paper (page 12).
Thanks for the help
I am reading some papers regarding the influence of a minimum wage standard of a neighbouring municipality (j) on the minimum wage standard in municipality (i). The model that is often used is spatial auto regression (SAR) model. This is often done in this way:
The Minimum wage standard is regressed on a weighted spatial lag and a lag of various controls and fixed effects.
The issue here is that the spatial lag is endogenous. In order to deal with this, often GMM or IV is used. For IV this is done by instrumenting the spatial lag with
. This is the weighted avarage of other municipalities exogenous variables.
For GMM this is done by:
Where again the spatial lag is insturmented for by
My issue is that I would like to know how the IV and GMM should be set up in Stata as I have no idea. See a link for the paper (page 12).
Thanks for the help
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