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Re: st: Re: simultaneous equations with fixed effects and robust standard errors


From   "Duy Hinh Khieu" <hinh.khieu@uky.edu>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: Re: simultaneous equations with fixed effects and robust standard errors
Date   Mon, 11 Jun 2007 23:23:43 -0400

Thank you - Kit Baum - very much for your comments. I am not really sure, however, of what you mean by standard IV estimators in the context of my model, which is mixed with one continuous endog var and 6 binary endog variables. If I use the xtivreg2 as follows, can you tell me if I translate your comments correctly into STATA code:

xtivreg2 maturity (leverage=size profit) (my_binary_var=size profit ) dividends year86-year05, fe robust endog( leverage my_binary_var)

I would need to do the bracket part of the code that contains my_binary_var six times because I have six binary endog variables and include them all in the above xtivreg2?

The reason why I need to use probit or logit is not because I am concerned about a consistent estimator, but because I need to do a two-stage estimates and the first stage involves a binary variable. Am I right?

If you have a source that states that the first stage estimation does not need to involve a probit or logit, I'd really appreciate your giving me that reference. All I have is Maddala (1983), pages 243-245.

Again, thank you so much.

Regards,
Hinh
-----Original Message-----
From: Kit Baum <baum@bc.edu>
To: statalist@hsphsun2.harvard.edu
Date: Mon, 11 Jun 2007 20:40:37 -0400
Subject: st: Re: simultaneous equations with fixed effects and robust standard errors

As Mark Schaffer's posts have often indicated, there is nothing
stopping you from using a standard instrumental variables estimator
in this context, in essence employing the linear probability model in
the 'first stage' estimation. You need not use a probit nor logit to
get consistent estimates of the equations of interest.


Kit Baum, Boston College Economics and DIW Berlin
http://ideas.repec.org/e/pba1.html
An Introduction to Modern Econometrics Using Stata:
http://www.stata-press.com/books/imeus.html


On Jun 11, 2007, at 2:33 AM, Duy Hinh Khieu wrote:

> Something else comes up in my model in anticipation of arguments on
> my research. I wonder if I can still use xtivreg2 if some dummies
> in my model now become endogenous as follows:
>
> Eq 1: leverage = a0 + a1*maturity + a2*control variable (lots of
> more control variable)
> Eq 2: maturity = b0 + b1*leverage + b2*Dummy endogenous (6 of them)
> + b3*control variable
>
> The endogenous dummies are in equation 2 only. What I could think
> of doing is to follow Maddala (1983) as I spelled out in an
> biprobit thread. Briefly, I need to run probit of the dummies on
> all exog var in equation 2, get the predicted values for the
> dummies, plug the predicted values in eq. 2, and then use xtivreg2
> to run eq.1 and eq.2 simultaneously.

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