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Re: st: IV probit with dummy endogenous regessors
On Thu, 10 May 2007 firstname.lastname@example.org wrote:
As Wooldridge (2002, p. 472) emphasizes, both the two-step and
maximum-likelihood estimators implemented by -ivprobit- (and -ivtobit-)
require that the endogenous regressors be continuous.
I have a few basic questions about IV probit.
My model is a probit with dummy endogenous regressors (for every dummy
endogenous regressor I have 3 dummy instruments).
Can I use ivprobit, or it can be only used with continuous endogenous
The model fitted by -ivprobit- can be written as
y1* = x'beta + delta*y2 + u1
y2 = x'gamma + z'eta + v2
with y1 = 1 if y1* > 0 and 0 otherwise, where y2 is endogenous, x
represents the included exogenous variables, and z are the additional
instruments. Both estimators assume that u1 and v2 are bivariate normal.
Thus, since v2 is normal, y2 given x and z must also be normal, and that
rules out discrete variables (of which a dummy is a special case).
-- Brian Poi
Wooldridge, J. M. (2002). Econometric Analysis of Cross Section and Panel
Data. Cambridge, MA: MIT Press.
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