Dear All,
I have a question about the implementation of 2SLS regression when the endogenous variable interacts with another exogenous variable.
For example, assume Y = X + B + X*B where X is endogenous, B is exogenous, and Z is an instrument for X.
In this case, the following command should be run in Stata:
However, if X is subsumed by the fixed effects, should the Z be included together with Z*B as an instrument for X*B? Or the Z*B should be the only instrument?
I have a question about the implementation of 2SLS regression when the endogenous variable interacts with another exogenous variable.
For example, assume Y = X + B + X*B where X is endogenous, B is exogenous, and Z is an instrument for X.
In this case, the following command should be run in Stata:
Code:
ivreghdfe Y B (X X*B = Z Z*B), absorb(F1 F2)
