Hi All,
I am conducting two related studies and desperately need your input to solve an issue.
In study 1 I look at
1) Y = f(X, controls) : How city-level income (X) influences the degree of a strategy of firms located in the focal city (Y)
In study 2, I test
2) Z = f(Y, Y*X, controls): How a firms strategy (Y) influences firms performance (Z) and how this effect of strategy on firm performance differs depending on the level of income of the city where the firm is located (Y*X).
To solve the endogeniety problem of Y, I used 2SLS.
First, I should get a fitted value of Y by regressing it on X and other explanatory variables. But here, should I include Y*X to get the fitted value of Y? If so, how? And if not, what should I do??
And would be there other alternative approaches than 2SLS to address this issue??
I would really really appreciate your advice.
Thanks in advance,
Eli
I am conducting two related studies and desperately need your input to solve an issue.
In study 1 I look at
1) Y = f(X, controls) : How city-level income (X) influences the degree of a strategy of firms located in the focal city (Y)
In study 2, I test
2) Z = f(Y, Y*X, controls): How a firms strategy (Y) influences firms performance (Z) and how this effect of strategy on firm performance differs depending on the level of income of the city where the firm is located (Y*X).
To solve the endogeniety problem of Y, I used 2SLS.
First, I should get a fitted value of Y by regressing it on X and other explanatory variables. But here, should I include Y*X to get the fitted value of Y? If so, how? And if not, what should I do??
And would be there other alternative approaches than 2SLS to address this issue??
I would really really appreciate your advice.
Thanks in advance,
Eli
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