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Re: st: two stage least square questions
No, you cannot use the fitted values or residuals from a first stage
using a different dep var in the second stage as you propose. You
can, however, simply model the effect of "any_commute" (binary X1' in
your notation) on Y directly; see
though you undoubtedly still have a selection problem--commuting and
wages can be observed only for the employed.
On 5/21/07, Zhiqiang Feng <email@example.com> wrote:
We like to do a two stage least square (2SLS) regression. We have looked
at some information in the forum. For example, the email communications
on "Re: st: 2SLS with Probit in the first-stage regression" in 2004.
However, our questions are somewhat different.
We are interested in the impact of commuting on health.
So the regression is:
Y = a + b1X1 + b2X2 + e
here Y is defined as health status of subjects, a continuous variable.
X1 is commuting time, a continuous and endogenous variable.
We like to instument X1 with Z1 and Z2, so the second regression is:
X1 = a + b1Z1 + b2Z2 + b3X2 + e
However, we think Z1, Z2 and X2 are associated with the decision on
whether subjects take up commuting instead of on commuting time, so we
prefer to use X1 as a binary variable indicating whether to commute, say
X1', in the second regression,.
X1' = a + b1Z1 + b2Z2 + b3X2 + u
We wonder if this is possible or CORRECT as we try to use the same
variable (commuting) differently in the first (as binary) and second (as
Any help would be appreciated.
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