INSTRUMENTS Subcommand (2SLS command)

INSTRUMENTS specifies the instrumental variables. These variables are used to compute predicted values for the endogenous variables in the first stage of 2SLS.

  • At least one INSTRUMENTS subcommand must be specified.
  • If more than one INSTRUMENTS subcommand is specified, the effect is cumulative. All variables that are named on INSTRUMENTS subcommands are used as instruments to predict all the endogenous variables.
  • Any variable in the active dataset can be named as an instrument.
  • Instrumental variables can be specified on the EQUATION subcommand, but this specification is not required.
  • The INSTRUMENTS subcommand must name at least as many variables as are specified after WITH on the longest EQUATION subcommand.
  • If all the predictor variables are listed as the only INSTRUMENTS, the results are the same as results from ordinary least-squares regression.

Example

2SLS DEMAND WITH PRICE, INCOME
  /PRICE WITH DEMAND, RAINFALL, LAGPRICE
  /INSTRUMENTS=INCOME, RAINFALL, LAGPRICE.
  • The endogenous variables are PRICE and DEMAND.
  • The instruments to be used to compute predicted values for the endogenous variables are INCOME, RAINFALL, and LAGPRICE.