Wander posted on Thursday, February 27, 2014 - 11:58 pm
I have to conduct a two-level model (level 1=respondents and level 2=cities). The variable of my interest is a level 2 variable. My concern is that the variable of my interest is likely to be endogenous (i.e., it is likely to be associated with unobserved level 1 and 2 factors). Accordingly, I want to apply an instrumental variable approach. I've read several readings but I was not able to find any information regarding the level 2 endogenous variable. For example, many readings deal with the endogenous problem of level 1 variables. Additionally, the fixed effects model is not suitable as it cannot estimate level 2 variables. It would be very much appreciated if someone tells me how to handle this issue in Mplus.