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Re: st: binary endogenous variable


From   Mark Schaffer <M.E.Schaffer@hw.ac.uk>
To   statalist@hsphsun2.harvard.edu, "S.Rahardja" <rahardjs@yahoo.com>
Subject   Re: st: binary endogenous variable
Date   Sat, 24 Jul 2004 13:32:43 +0100 (BST)

There are at least two approaches you can follow.

First, you can estimate the system using -treatreg-.  That means you also 
specificy a probit-type treatment equation for your endogenous dummy.  -
treatreg- estimates the treatment equation and the outcome equation for y 
as a system.

Second, if want to estimate only the outcome equation y, you can simply 
use -ivreg- or -ivreg2-.  Consistency of IV does not require the endogenous 
variable(s) to be continuous; endogenous dummies are fine.  The results 
won't be as efficient as with the sytem estimation using -treatreg-, but 
they will have the advantage (as usual with single-equation methods) of 
being consistent under a broader range of assumptions than the system 
estimation results.

Hope this helps.

--Mark

Quoting "S.Rahardja" <rahardjs@yahoo.com>:

> Dear Colleagues,
> 
> I wonder if you could give me tips on how should I
> deal with an endogenous dummy variable.
> What I'm thinking is to run using OLS, say:
> y = a + bX + dD + e
> 
> where D= 0|1 is the endogenous dummy variable.
> 
> Or, does this sound more like a selection problem
> (where I can split the sample into two) ?
> 
> Thank's in advance.
> 
> 
> 
> 		
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Prof. Mark Schaffer
Director, CERT
Department of Economics
School of Management & Languages
Heriot-Watt University, Edinburgh EH14 4AS
tel +44-131-451-3494 / fax +44-131-451-3008
email: m.e.schaffer@hw.ac.uk
web: http://www.sml.hw.ac.uk/ecomes
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