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st: RE: how to cluster with ivprobit with two-step option?


From   "Jennifer Leavy" <J.Leavy@ids.ac.uk>
To   <statalist@hsphsun2.harvard.edu>
Subject   st: RE: how to cluster with ivprobit with two-step option?
Date   Mon, 21 Aug 2006 14:25:02 +0100

Dear Mark
 
I am trying to model the marketing decisions of smallholder farmers, not all of whom sell their crops. So I start with a heckman selection model with a probit in the first stage, i.e. dependent variable is whether or not that person sells their crops, and in the second stage the outcome equation has as the dependent variable how much is sold, given that the person does actually sell. So that takes care of the sample selection bias. There is also potential endogeneity in that some of the regressors are likely to be endogenous. So i need to incorporate instrumental variables in both the selection ('first stage') and outcome ('second stage') equations. So I am referring to stages in the heckman selection model. In fact, as you say, each of those stages has two stages.
 
I hope I make sense!
 
But your comment about what the cluster option doessolves my problem, I think  - I can forget about using cluster in the first stage and use the two-step option rather than MLE, then take the inverse mills ratio from this for the second stage of the heckman?
 
Jennifer

> -----Original Message-----
> From: owner-statalist@hsphsun2.harvard.edu 
> [mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of 
> Jennifer Leavy
> Sent: Monday, August 21, 2006 11:00 AM
> To: statalist@hsphsun2.harvard.edu
> Subject: st: how to cluster with ivprobit with two-step option?
> 
> Dear all
>  
> I am trying to run a heckman selection model with potentially 
> endogenous regressors in both the selection and outcome 
> equations. I used ivprobit in the first stage, and need to 
> use the cluster option because my data are from a household 
> survey and some of the respondents come from the same 
> household. This means I cannot use the twostep option with 
> ivprobit as cluster is not allowed. But as I have more than 
> one potentially endogenous regressor and therefore several 
> instruments

Can you say more precisely what the structure of your model is?  I'm a
little confused by using "ivprobit in the first stage".  ivprobit with
the twostep option does itself have its own first stage.  Plus the
cluster option doesn't change coefficient estimates, only the SEs.  If
you are using ivprobit in a first stage, then you wouldn't need the SEs.
... Which is why I'm a little confused.

--Mark

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
44-131-451-3296 fax
http://www.sml.hw.ac.uk/cert

> I find that the model is not converging with the 
> MLE default - I have been pressing break after a few thousand 
> iterations. I've been unable to find a user-written programme 
> that allows the cluster option with twostep. I would very 
> much appreciate any suggestions as to how I can get round 
> this problem (I'm using STATA 9), for example, would I be 
> able to alter the code in the ivprob programme to allow me to 
> do this? Or is there a statistical reason why it's not 
> already built in to the ivprobit, twostep com  mand?
>  
> Many thanks
>  
> Jennifer
>  
>  
> 

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