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From |
Ricardo Henriquez <rhenriquez@sii.cl> |

To |
statalist@hsphsun2.harvard.edu |

Subject |
RE: st: testing endogeneity in a two-equation model with censored andbinary dependent variables. |

Date |
Wed, 09 Jul 2003 11:30:11 -0400 |

Prof. Schaffer: 1. Thanks for your suggestions. 2 With respect to your comment: "This last statement confuses me. The standard DWH test of endogeneity is used when estimating a single equation using instrumental variables. The endogeneity relates to one or more regressors in this single equation. These regressors can be binary -it doesn't matter for either the IV estimation or the DWH test." Ronna Cong, from Stata Corporation, wrote an excelent response to the questions: "How to test endogeneity?", "How do I perform a Durbin-Wu-Hausman test?" (see the FAQs under endogeneity). In her response she uses as an example a simultaneous two-equation model and utilises regression analysis (regress), indicating, indirectly, that the two dependent variables are continuous. However, you cannot use the procedure suggested by Ronna Cong when one of the the dependent variables (in my case the endogenous)is binary. In other words, it seems to me that does matter what type of variables your are considering. Am I wrong?...... Regards, Ricardo Henríquez Chile -----Mensaje original----- De: owner-statalist@hsphsun2.harvard.edu [mailto:owner-statalist@hsphsun2.harvard.edu]En nombre de Mark Schaffer Enviado el: Miércoles, 09 de Julio de 2003 9:29 Para: statalist@hsphsun2.harvard.edu Asunto: Re: st: testing endogeneity in a two-equation model with censored and binary dependent variables. Ricardo, > Dear Statalist readers, > > I am estimating the following two-equation model using a two-stage procedure > suggested by Maddala (1983): > > Y1 = a1X1 + B1Y2 + e1 > > Y2*= a2X2 + e2 > > where Y2=1 if Y2*>0 > Y2=0 otherwise > > Y1 is censored at zero and Y2 is binary (the realised value of the latent > variable > Y2*). Since Y2 is assumed to be endogenous, I would like to test the > endogeneity of Y2. I checked the Durbin-Wu-Hausman test but it is not > appropriate when one of the dependent variable is binary. This last statement confuses me. The standard DWH test of endogeneity is used when estimating a single equation using instrumental variables. The endogeneity relates to one or more regressors in this single equation. These regressors can be binary - it doesn't matter for either the IV estimation or the DWH test. If I understand correctly, you can't use the DWH test for a different reason - Y1 is censored and you can't us straightforward IV to estimate the Y1 equation. Would the following work? 1. Estimate the Y1 equation using Joe Harkness' -ivtobit-, i.e., treat Y2 as endogenous. This is your efficient but possibly inconsistent estimator. 2. Estimate the Y1 equation using -tobit-, i.e., treat Y2 as exogenous. This is your inefficient but consistent estimator. 3. Use -hausman- to perform a Hausman test. It should be distributed as chi-squared with 1 degree of freedom (because you are testing 1 variable for endogeneity). The output of -hausman- may suggest that there are 2 degrees of freedom (because -hausman- tries to be clever in working out the df and occasionally doesn't get it right), but df=1. Comments, anybody? --Mark > Thus, does anyone > know if there is an alternative way to test for endogeniety in such a > models. > > Any help will be much appreciated. > > > Ricardo Henríquez > Chile > > * > * For searches and help try: > * http://www.stata.com/support/faqs/res/findit.html > * http://www.stata.com/support/statalist/faq > * http://www.ats.ucla.edu/stat/stata/ Prof. Mark E. Schaffer Director Centre for Economic Reform and Transformation Department of Economics School of Management & Languages Heriot-Watt University, Edinburgh EH14 4AS UK 44-131-451-3494 direct 44-131-451-3008 fax 44-131-451-3485 CERT administrator http://www.som.hw.ac.uk/cert * * For searches and help try: * http://www.stata.com/support/faqs/res/findit.html * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/ * * For searches and help try: * http://www.stata.com/support/faqs/res/findit.html * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

**Follow-Ups**:**RE: st: testing endogeneity in a two-equation model with censored and binary dependent variables.***From:*"Mark Schaffer" <M.E.Schaffer@hw.ac.uk>

**References**:**Re: st: testing endogeneity in a two-equation model with censored and binary dependent variables.***From:*"Mark Schaffer" <M.E.Schaffer@hw.ac.uk>

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