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


From   Kit Baum <baum@bc.edu>
To   statalist@hsphsun2.harvard.edu
Subject   st: Re: simultaneous equations with fixed effects and robust standard errors
Date   Wed, 13 Jun 2007 06:38:43 -0400

No, your syntax is not correct. All endogenous variables and excluded instruments must appear in one parenthesized expression in ivreg, ivregress, xtivreg, ivreg2, xtivreg2:

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

If you want to put all 6 binary variables into the same equation, you will obviously need more instruments. The equation as written above is exactly identified, and you cannot do tests of overidentifying restrictions.



Re the justification for this approach: if as I suggested you searched the Statalist archives, you would find

http://www.stata.com/statalist/archive/2004-07/msg00710.html

You do not need to use probit or logit to generate consistent estimates of the parameters of the equation as written above.

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 13, 2007, at 2:33 AM, Duy Hinh Khieu wrote:


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.
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