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st: MVprobit in an instrumental variable framework?
We want to estimate 3 equations (with binary dependent variables)
simultaneously using mvprobit. However, we have a potential problem
with self selection and unobserved characteristics (it's a migration
paper and we only take the subsample of labour market inactive
individuals). Therefore, we have thought to include a fourth equation
to instrument for the binary variable "migrant household", which might
be endogeneous (using migrant networks as an instrument).
Is this approach valid? I.e. will the inclusion of a 4th equation with
an instrument correct for potential biases just as in the biprobit? Or
is there a two-step procedure that would suit here?
We have thought long about this problem and searched around quite a
bit. Therefore, we would be very grateful for any help.
Thank you in advance,
Ph.D. Candidate in Economics
Free University of Berlin
Tel.: +49-30-838 58511
Fax: +49-30-838 58540
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