The use of 2SLS is appropriate since the effects of multicollinearity (some level
of which cannot be denied in these models) are less serious in 2SLS than in IV
estimation. The estimation and inference are further made robust to heteroscedasticity
and serial correlation.
Data and Sample Area
The data used in this study come from the Tegemeo Agricultural Monitoring and Policy
Analysis Project (TAMPA) data set which consists of a three-period panel collected over
a period of seven years. The household surveys were carried out in 1996/97, 1999/00 and
2003/04 cropping seasons. The specific sample used in this study consists of a total of
3972 households (1324 for each year). The panel contains data on economic,
demographic and other social characteristics of the households. Table 1 presents the
description of the variables used in this study including their means and standard
deviations.
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