Hello, I've recently run across a series of problems when I try to estimate models that include factors via 2SLS. The problems arise in versions 3.5.5 and 4.1.3. (I'm also using I'm using systemfit 1.1.14.) In all cases, zelig() works fine, but problems arise with setx() or sim(). Here is a minimal example: data(klein) klein$fac <- factor(rep(letters[1:3], times = 7)) z.out <- zelig( formula = list( "mu1" = Wtot ~ fac + P1, "mu2" = fac ~ X + X1 + P1, "inst" = ~ X + X1 + P1), model = "twosls", data = klein) x.out <- setx(z.out, fac = 'b') s.out <- sim(z.out, x = x.out) In Zelig 4.1.3, the setx() command above yields an "Error in form[[3]] : subscript out of bounds" message. In Zelig 3.5.5, there is no problem with setx(), but the sim() command yields: "Error: subscript out of bounds." If I make numeric dummies out of the factor, the problem vanishes in both versions of Zelig: klein$b <- as.numeric(klein$fac == 'b') klein$c <- as.numeric(klein$fac == 'c') z.out <- zelig( formula = list( "mu1" = Wtot ~ b + c + P1, "mu2" = b ~ X + X1 + P1, "mu3" = c ~ X + X1 + P1, "inst" = ~ X + X1 + P1), model = "twosls", data = klein) x.out <- setx(z.out, b = 0) s.out <- sim(z.out, x = x.out) But when a factor has many levels, it can be laborious to convert it into a set of dummies that will work with setx() and sim(). (Using model.matrix() doesn't help here: it creates matrices of dummies, and sim() doesn't seem to like matrices in formulas.) Short of dummying out my factors, is there anything that I can do to use setx() and sim() when my model has factors and I want to use 2SLS? Thank you, John