This package package adds an absorb() option to ivreg2, so we can run IV regressions with multiple fixed effects, as with reghdfe.

Installation steps

ivreghdfe requires three packages: ivreg2, reghdfe (version 4.x) and ftools. Run the lines below to install everything you might possibly need:

* Install ftools (remove program if it existed previously)
cap ado uninstall moresyntax
cap ado uninstall ftools
net install ftools, from("https://github.com/sergiocorreia/ftools/raw/master/src/")

* Install reghdfe 4.x
cap ado uninstall reghdfe
net install reghdfe, from("https://github.com/sergiocorreia/reghdfe/raw/master/src/")

* Install boottest for Stata 11 and 12
if (c(version)<13) cap ado uninstall boottest
if (c(version)<13) ssc install boottest

* Install moremata (sometimes used by ftools but not needed for reghdfe)
cap ssc install moremata

* Install ivreg2, the core package
ssc install ivreg2

* Finally, install this package
cap ado uninstall ivreg2hdfe
cap ado uninstall ivreghdfe
net install ivreghdfe, from(https://github.com/sergiocorreia/ivreg2_demo/raw/master/)

If you are in a server, you can also download the zipfile and install it locally:

cap ado uninstall ivreghdfe
net install ivreghdfe, from(c:\git\ivreg2_demo)

Advice

This code just modifies ivreg2 adding an absorb() option that uses reghdfes Mata functions. When used, absorb() will also activate the small, noconstant and nopartialsmall options of ivreg2 (basically to force small sample adjustments, which are required as we might have a substantial number of fixed effects).

If you need to pass optimization options directly to reghdfe (e.g. tolerance, choice of transform, etc.) you can do that as a suboption of absorb():

sysuse auto, clear
ivreghdfe price weight (length=gear), absorb(turn trunk, tol(1e-6) accel(sd))

This is gives the same result as using the old version of reghdfe (but slower):

reghdfe price weight (length=gear), absorb(turn trunk) tol(1e-6) accel(sd) old

Residuals

To save residuals, do this:

sysuse auto
ivreghdfe price weight, absorb(trunk, resid(myresidname))

Notice the resid() option within absorb. If you call it without parenthesis, residuals will be saved in the variable _reghdfe_resid.

You can also use the other predict options of reghdfe, such as d:

predict d, d