EViews.com

Hello,

I'm going over a chapter in the book about 2SLS, and I've reproduced the books estimates the whole chapter except for the following problem:

Regress: (restricting the sample to {if inlf=1})

log(wage) c educ exper expersq

Educ is assumed to be endogenous and the IV of motheduc and fatheduc are used.

However when I put motheduc and fatheduc into the instrument list, it says insufficient instruments. Meanwhile the book's answer is as follows:

.048 + 061educ + .044exper -.009expersq

n=428, r2=.136

see attached file

Thank you

It would help if you told us which book...

But, at a guess, you need to include educ and educsq as instruments too.

It's the 2006 Wooldridge Economics. Chapter 15, example 15.5

Oh I got the right answer now, I was confused by the syntax. I thought Instrument list mean only IVs. To be honest, I'm not sure why that's why it works, does it have something to do with reduced form equations?

The instrument list does mean only IVs, but sometimes a variable is both an instrument and a RHS variable.