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st: RE: Re: several endogenous dummies


From   "Verpoorten, Marijke" <Marijke.Verpoorten@econ.kuleuven.be>
To   <statalist@hsphsun2.harvard.edu>
Subject   st: RE: Re: several endogenous dummies
Date   Fri, 1 Sep 2006 14:27:55 +0200

Hi Rodrigo,

Thanks a lot for your answer. I'm sorry for my late reply; I was
traveling.

To answer to your first three questions: (1)I have a set of 17
instruments among which several cross-products and squares of the
exogenous RHS variables, (2) I use the same set of instruments for each
of the variables, though for some variables some instruments are not
relevant. I did not find a way to use different subsets of instruments
in the ivreg2 procedure, (3) I need to instrument five dummies and two
count variables. These variables give information on whether or not a
household was hit by a particular war-related shock, such as the
death/illness of a household member, imprisonment of a member, months
taken refuge abroad etc. I want to analyze which type of shock has a
long term effect on the household's welfare.

Household welfare in 2002 = f(household welfare in 1990, household
characteristics in 1990, shocks occurring between 1990-2002)

When I use the usual ivreg2 procedure to solve for the possible
endogeneity of the war-related shocks, I face the weak instrument
problem. Therefore I also use the condivreg procedure, for each shock
separately, while using the most relevant set of instruments for each
shock (those significant at 10% in the first stage of ivreg2). However,
I don't know whether it makes sense to instrument for each shock
separately.

I'm not sure I understand your suggestion about using the mlogit or
mprobit procedure. Is this to be used in the first stage? Is it possible
when the dummies may overlap, i.e. a household may face several shocks.
How may the first stage information be used in the second stage? As
predicted probabilities?

I also have to admit that I don't know what you mean with a full
characterization of the problem using ml. Could you put me on the right
track with a reference to a stata code, a textbook or an article?

Thank you very much,

Marijke





-----Original Message-----
From: owner-statalist@hsphsun2.harvard.edu
[mailto:owner-statalist@hsphsun2.harvard.edu] On Behalf Of Rodrigo A.
Alfaro
Sent: zaterdag 26 augustus 2006 6:22
To: statalist@hsphsun2.harvard.edu
Subject: st: Re: several endogenous dummies

Marijke,

I don't know the answer for your question but I can give you some
questions 
that you can explore. Note that the reference that you wrote describes 1

dummy variable, which sounds reasonable to do it by that procedure
instead 
of linear IV. Moreover, Wooldridge said that the estimation of the 
parameters and the specification of the model in the first stage do not 
affect the standard errors of 2SLS. Great!!!

How many instruments are you going to use for these dummies? Same set
for 
each one? What number several means? Why not combine the choices into a
multinominal problem (solving by mlogit or mprobit)? After you feel 
confortable with your entire model, equations for the dummies plus your
2SLS 
one I think that it is not longer valid the non-effect on std errors
when 
you are trying to solve for several endogenous dummies.

Maybe a full characterization of the problem is the way to go. You can 
describe all the process (endogenous dummies plus your continuous
variable) 
as a maximum likelihood framework. You will pay with additional
assumption 
above the model but the reward will be a complete system with
"no-better" 
standard errors.

Rodrigo.



----- Original Message ----- 
From: "Verpoorten, Marijke" <Marijke.Verpoorten@econ.kuleuven.be>
To: <statalist@hsphsun2.harvard.edu>; <statalist@hsphsun2.harvard.edu>; 
<statalist@hsphsun2.harvard.edu>
Sent: Friday, August 25, 2006 3:38 PM
Subject: st: several endogenous dummies


Dear statlisters,

I wonder whether, when having a continuous variable as a dependent
variable 
and several endogenous dummies, it`s better to use the usual 2SLS
(ivreg2), 
instead of instrumenting the dummies non-linearly (as in Wooldridge,
2002, 
p623-625). Could you help me with this question?

Kind regards,
Marijke

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