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From |
Kit Baum <baum@bc.edu> |

To |
statalist@hsphsun2.harvard.edu |

Subject |
st: Re: 2SLS with probit in the first stage regression |

Date |
Fri, 15 Feb 2008 07:01:05 -0500 |

Please read the Baum-Schaffer-Stillman paper, SJ 2007 (preprint available from my website below) on this subject. You can estimate the equation with an endogenous dummy consistently with IV, and in our -ivreg2- you can use the endog() option to test whether that variable must be considered endogenous. You can use -xtivreg2- to perform a fixed effect model, as -xtivreg2- has the same options available as does -ivreg2- in terms of endogeneity tests.

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 Feb 15, 2008, at 2:33 AM, Renuka wrote:

I would like to find out if training which is one of my RHS variable is an endogenous variable. The original regression was a pay equation as follows: .xtreg y training meanworkplacetraining x2 x3 x4 I used xtreg as the data are grouped across workplaces and considered to be a less biased OLS estimator. Training is a binary variable, dummy=1 if they have had training and 0 otherwise and the data is cross-section data. I left out the meanworkplace training for now. I want to deal with one endogenous variable at a time. I did: .probit training x2 x3 x4 z where z = my instrument I then did: predict ghat I then issued: .ivreg pay x2 (training = ghat) x3 x4 Part of what I got is: Number of obs = 14321 F( 58, 14262) = 115.93 Prob > F = 0.0000 R-squared = 0.3104 Adj R-squared = 0.3076 Root MSE = .49362 Coef. Std. Err. t P>|t| - -------------+---------------------------------------- training |.2904799 .116244 2.50 0.012 Can I take interpret that the training variable is not endogenous? I would be grateful if anyone would tell me if I have done it correctly to find out if my training variable is endogenous and if it is endogenous. If I have done it incorrectly what would be the correct way to go about it.

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