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Re: st: treatreg


From   "Mark Schaffer" <M.E.Schaffer@hw.ac.uk>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: treatreg
Date   Mon, 23 Aug 2004 16:37:50 +0100

Egil,

Subject:        	st: treatreg
Date sent:      	Thu, 19 Aug 2004 12:14:54 +0200
From:           	"Kjerstad Egil (SNF)" <Egil.Kjerstad@snf.no>
To:             	<statalist@hsphsun2.harvard.edu>
Send reply to:  	statalist@hsphsun2.harvard.edu

> Hi,
> 
> I am a 7.0 user and seek to find a way to expand the scope for the
> treatreg command. First challenge: The treatment effects model
> estimates the effect of an endogeous binary treatment on another
> endogenous, continuous variable, conditional on two sets of
> independent  variables. How can the model be altered to allow for,
> say, three treatment categories?

I don't think the code for a modified -treatreg- is out there, so you 
might want to consider the following alternative, discussed in 
Wooldridge's 2002 book in chapter 18.

(a) Estimate the three "first-stage" probits by hand, i.e., with the 
treatment categories as dependent variables in each of the probits.

(b) For each probit, obtained the predicted probability for the 
binary treatment.  This gives you 3 sets of fitted values.

(c) Estimate your treatment equation using instrumental variables, 
where the 3 sets of fitted values are instruments (NOT regressors!) 
for the three treatment variables.

This procedure is more efficient than using simple IV.

What's very convenient about this is that the standard errors 
generated by this IV procedure are correct - no need for messy 
corrections of the var-cov matrix.

You'll probably want to have at least 3 different exclusion 
restrictions so that the equation is reasonably well identified.

Hope this helps.

--Mark

> Second challenge: What if the
> endogenous, continuous variable is a covariate in the expression for
> another endogenous, continuous variable? 
> 
> Do such amendments to the treatreg command already exist 'out there'?
> If so, are they available?  
> 
> Best regards
> 
> Egil
> 
> *
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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

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