格林 面板数据讲义-8.pptVIP

Econometric Analysis of Panel Data Econometric Analysis of Panel Data 8. Instrumental Variables Estimation Structure and Regression Agenda Single equation instrumental variable estimation Exogeneity Instrumental Variable (IV) Estimation Two Stage Least Squares (2SLS) Generalized Method of Moments (GMM) Panel data Hausman and Taylor’s formulation Application Arellano/Bond/Bover framework Exogeneity An Experimental Treatment Effect The Measurement Error Problem The Endogeneity Problem Regression: y = βx + ε Changes in x are associated with changes in y, but not ε dy/dx is measured by Cov(x,y), “dx/dx” is measured by Var(x)dy/dx = β dx/dx + dε/dx = β  β = Cov(x,y)/Var(x) If x is correlated with ε, then changes in x are associated with changes in ε.There are now two sources of change in y, direct change in x, change in ε associated with change in x dy/dx measured in the data is not equal to β dx/dx = β.dy/dx = β dx/dx + dε/dx = β + dε/dx Instrumental Variables Instrumental variable associated with changes in x, not with ε dy/dz = β dx/dz + dε /dz. The second term is 0. β =cov(y,z)/cov(x,z)This is the “IV estimator” Example: Corporate earnings in year t Earnings(t) = β RD(t) + ε(t) RD(t) responds directly to Earnings(t) thus ε(t) A likely valid instrumental variable would be RD(t-1) which probably does not respond to current year shocks to earnings. The First IV Study(Snow, J., On the Mode of Communication of Cholera, 1855) London Cholera epidemic, ca 1853-4 Cholera = f(Water Purity,u)+ε. Effect of water purity on cholera? Purity=f(cholera prone environment (poor, garbage in streets, rodents, etc.). Regression does not work. Two London water companies Lambeth Southwark ======|||||====== Main sewage discharge IV Estimation Cholera=f(Purity,u)+ε Z = water company Cov(Cholera,Z)=δCov(Purity,Z) Z is randomly mixed in the population