Hi friends
I am new to the use of STATA and Instrumental variables (IV) and using STATA 14.2
I am looking at the impact of introduction of Value Added Tax (VAT) in government tax share in developing countries (so its a panel data set covering period 1980-2015). And using a dummy variable to represent the before and after VAT introduction with a set of control variables. At the first stage I am using an OLS regression using areg command as follows
areg tax share VAT dummy control variables year, absorb (country code)
my first question is does the above command control for country fixed effects ?
Since results of this shows possible endogeneity problem caused by reverse causality I am using an IV which is the number of neighboring countries with VAT to represent the VAT dummy with the following command.
ivregress 2sls tax share (VAT dummy = VAT neighbour) control variables, first
In this case, my second question is in ivregess how can I control for country and year fixed effects. IF I cannot do that what other options available.
Thanks in advance
Harsha
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