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Simpler standard errors for two-stage optimization estimators estimation in normal linear models

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  • Joseph V. Terza

    (Indiana University Purdue University Indianapolis)

Abstract

Aiming to lessen the analytic and computational burden faced by practitioners seeking to correct the standard errors of two-stage estimators, I offer a heretofore unexploited simplification of the conventional formulation for the most commonly encountered cases in empirical application—two-stage estimators that involve maximum likelihood or pseudomaximum likelihood estimation. With the applied researcher in mind, I focus on the two-stage residual inclusion estimator designed for nonlinear regression models involving endogeneity. I demonstrate the analytics and Stata and Mata code for implementing my simplified standard-error formula by applying the two-stage residual inclusion method to the birthweight model of Mullahy (1997, Review of Economics and Statistics 79: 586–593) using his original data. Copyright 2016 by StataCorp LP.

Suggested Citation

  • Joseph V. Terza, 2016. "Simpler standard errors for two-stage optimization estimators estimation in normal linear models," Stata Journal, StataCorp LP, vol. 16(2), pages 368-385, June.
    • Handle: RePEc:tsj:stataj:y:16:y:2016:i:2:p:368-385
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    Cited by:

    1. Wendkouni Jean‐Baptiste Zongo & Bruno Larue & Carl Gaigné, 2023. "On export duration puzzles," American Journal of Agricultural Economics, John Wiley & Sons, vol. 105(2), pages 453-478, March.
    2. Sergi Jiménez-Martín & José M. Labeaga & Majid al Sadoon, 2020. "Consistent estimation of panel data sample selection models," Working Papers 2020-06, FEDEA.
    3. Anne‐Célia Disdier & Carl Gaigné & Cristina Herghelegiu, 2023. "Do standards improve the quality of traded products?," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 56(4), pages 1238-1290, November.
    4. Geraci Andrea & Fabbri Daniele & Monfardini Chiara, 2018. "Testing Exogeneity of Multinomial Regressors in Count Data Models: Does Two-stage Residual Inclusion Work?," Journal of Econometric Methods, De Gruyter, vol. 7(1), pages 1-19, January.

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