Estimation of Models with Grouped and Ungrouped Data by Means of 2SLS

Phoebus Dhrymes and Lleras-Muney, Adriana
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Phoebus Dhrymes: Columbia University
Lleras-Muney, Adriana: Princeton University

No 251, Working Papers from Princeton University, Woodrow Wilson School of Public and International Affairs, Center for Health and Wellbeing.

Abstract: This paper deals with a special case of estimation with grouped data, where the dependent variable is only available for groups, whereas the endogenous regressor(s) is available at the individual level. By estimating the first stage using the available individual data, and then estimating the second stage at the aggregate level, it might be possible to gain efficiency relative to the OLS and 2SLS estimators that use only grouped data. We term this the Mixed- 2SLS estimator (M2SLS). The M2SLS estimator is consistent and asymptotically normal. We also provide a test of efficiency of M2SLS relative to OLS and 2SLS estimators.

Keywords: Two-stage least squares; instrumental variables; grouped data; mixed two stage least squares; test of efficiency (search for similar items in EconPapers)
JEL-codes: C10 C30 C43 (search for similar items in EconPapers)
Date: 2004-03

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