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From |
"Yatawara, Ravi" <yatawarr@lerner.udel.edu> |

To |
<statalist@hsphsun2.harvard.edu> |

Subject |
RE: st: switching regression and endogenous variables in mlogit |

Date |
Fri, 15 Apr 2005 21:02:22 -0400 |

Hi Richard and Mary, Sorry I was not in the office till now- thanks for the feedback. I shall try to execute your suggestions. My dependent variable is a trade policy variable. My baseline estimation uses the Tariff LEVEL as the dependent variable- which is a CONTINUOUS variable. The Stabilization variable is indeed DICHOTOMOUS and equals 1 for the year a program was implemented, zero otherwise. Regarding the tariff level - I also have an alternative measure of tariff policy- which is a variable that reflects regimes changes- so for every country year 0= status quo (no change), 1 switch of tariff regime to more liberalization , 2= switch to a tariff regime that is more protectionist. Hence my inquiry about mlogit with endogenous dummy. any feedback is appreciated. -----Original Message----- From: owner-statalist@hsphsun2.harvard.edu [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of Robert Duval Sent: Friday, April 15, 2005 2:28 PM To: statalist@hsphsun2.harvard.edu Subject: Re: st: switching regression and endogenous variables in mlogit Hi Ravi and Mary, My solution works if the DEPENDENT variable in the equation of interest (Tariff level) is continuous, and the potentially endogenous explanatory variable (stabilization) is dichotomous. If Tariff level is binary then Mary's suggested solutions should work fine. Maybe you can tell us more about your dependent variable... cheers, robert On 4/15/05, Mary Alexinskaya <alexinskaya@yahoo.com> wrote: > Dear Ravi and Robert, > > I am slightly concerned with the solution proposed by > Robert, because the proceedure that he suggests seems > to be valid only for linear regressions, while Ravi > has a dummy endogenous variable. > > While being unaware of the fully correct approach to > tackling this problem, I have a question for Ravi: how > many levels of tariff do you have? Can this variable > be treated as continuous, or, can it be transformed > into a dummy variable (such as "high" and "low" level > of taxes)? > > I ask this question because Stata offers easy > solutions for these two cases. In case you have a > continuous explanatory variable, you can explore a > command such as cdsimeq. Or, you can adopt > Rivers-Vuong approach to determine whether your > variable is indeed endogenous and then address the > problem respectively (the approach is proposed in > "Limited Information Estimators and Endogeneity Tests > for Simultaneous Probit Models", Rivers, Vuong, > Journal of Econometrics 39, 1988, pp347-366, and also > explained in Wooldridge, ch.15.3.6). > > In case you can have a binary dependent variable, you > can go for biprobit command in Stata (as explained in > Greene 2001, ch.19, this command, which does a > simultaneous estimation, in case of two binary > dependent variables is a valid proceedure). > > Please let me know if you do find a real solution for > mlogit with dummy endogenous variable. > > Best wishes! > Maria > > > --- Robert Duval <rduval@gmail.com> wrote: > > > Ravi, > > > > The way you formulated your model seems to as a > > restricted (or > > simplified) version of the switching regression > > model (i,e, the one i > > mentioned in my previous email). In your version, > > the coefficients for > > x1-x3 are restricted to be the same under both > > regimes (i.e. > > stabilization programs or not). Some people call > > this in the > > litetature an endogenous dummy variable problem. > > > > The inconsistency that arises from this endogeneity > > can be solved by: > > > > 1) Estimating "x4 = x1 x2 x5 +error", and using the > > predicted "x4 hat" > > out of this estimation, in the second-stage > > estimation of your main > > equation of interest "Tariff level = x1 x2 x3 'x4 > > hat' +e". You would > > have to be careful in adjusting the standard errors > > in the second > > stage because the x4 is a predicted variable with > > its own intrinsic > > variability (this is called generated regressor > > adjustment in the > > literature). > > > > 2) You can also use the residuals obtained from > > estimating "x4 = x1 x2 > > x5 +error", > > denoted by 'v hat' and add them as a regressor in > > your equation of > > interest, i.e. > > > > "Tariff level = x1 x2 x3 x4 'v hat' + e" > > > > Notice that in here the the x4 variable doesn't need > > to be modified. > > The previous comments of adjusting the se's still > > apply. > > > > If you are willing to assume normality in the second > > equation, then > > these routines should be quite easy to implement > > using probit. > > > > I think that the treatment effects type of models > > should also give you > > the answer you're looking for. Although, I have > > never used their > > commands in STATA, the set-up of your problem seems > > to me the same as > > the one those models are trying to estimating. > > > > If you want to read more about this I suggest you > > check either the > > Maddala (1983) textbook on LIMited Dependent > > variables, or the Vella > > (1998) "Estimating Models with Sample selection > > bias: A survey" in the > > Journal of Human Resources , or the Wooldrige > > graduate textbook. > > > > Best > > Robert > > > > On 4/15/05, Yatawara, Ravi > > <yatawarr@lerner.udel.edu> wrote: > > > To expand on my investigation .... > > > I consider the effect on tariffs of adopting a > > stabilization plan. The > > > endogeneity issue arises in that the decision to > > the adopt a > > > stabilization program is a choice variable, > > correlated with > > > unobservables (relegated to the error term ) that > > affect tariff levels. > > > Each data point is a country year. > > > > > > So I have 2 equations > > > 1) Tariff level = x1 x2 x3 x4 ( where x4=dummy if > > stabilization occurred > > > that year) + error > > > 2) Stabilization ( 0 or 1) = x1 x2 x5 +error > > > > > > Appreciate any help. I also tried a treatment > > effects model. > > > Best, > > > Ravi > > > -----Original Message----- > > > From: owner-statalist@hsphsun2.harvard.edu > > > [mailto:owner-statalist@hsphsun2.harvard.edu] On > > Behalf Of Robert Duval > > > Sent: Friday, April 15, 2005 1:43 AM > > > To: statalist@hsphsun2.harvard.edu > > > Subject: Re: st: switching regression and > > endogenous variables in mlogit > > > > > > Does 'movestay' helps solving your question 1? In > > general, in the > > > traditional switching regression model (a la > > Maddala and Nelson,1975) > > > the covariance between the errors in the two > > outcome equations is not > > > identified. Maybe if you explain more in detail > > what are you trying to > > > estimate it would help... > > > > > > best > > > robert > > > > > > On 4/15/05, Yatawara, Ravi > > <yatawarr@lerner.udel.edu> wrote: > > > > Folks, > > > > > > > > I have two questions, > > > > 1) does anyone have a program for doing > > switching regressions? The > > > > switchr in stata is not what I need since my > > errors in the two > > > equations > > > > are NOT > > > > independent, and identically distributed. > > > > > > > > 2) Is there a way to tackle a potentially > > endogenous variable in a > > > > multinomial logit estimation equation? > > > > > > > > Thanks > > > > Ravi > > > > > > > > * > > > > * 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/ > > > > > > * > > > * 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/ > > > > __________________________________ > Do you Yahoo!? > Yahoo! Small Business - Try our new resources site! > http://smallbusiness.yahoo.com/resources/ > * > * 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/ * * 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/

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