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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 |
Sat, 16 Feb 2008 07:07:35 -0500 |

I guess I don't understand your setup. You're using xtreg, which is appropriate for panel data. If the original regression is

.xtreg y training meanworkplacetraining x2 x3 x4

and there is a possibility that training is endogenous, you definitely are violating the key assumption of the random-effects model, that the regressors are distributed independently of the errors. You should be estimating this equation allowing for endogeneity of the suspected variable, and need to perform a Hausman test of the appropriateness of the key assumption. You can do the Hausman test by estimating the model with -xtivreg- using RE and FE. If you find that the RE assumption cannot be maintained, then use - xtivreg2- with fixed effects and use the -endog()- option to test whether the endogeneity is an issue.

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 16, 2008, at 2:33 AM, statalist-digest wrote:

Thank you, Kit. I should have mentioned also that my original equation which has one of the RHS regressors as potentially endogenous is a random effects GLS model. Also I should have pointed out I am using cross-section data. Would your kind answer still apply?

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