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st: obtaining correct significance level for the endogenous variable in ivprobit with a potentially weak instrument


From   "Danny Cohen-Zada" <danoran@bgu.ac.il>
To   <statalist@hsphsun2.harvard.edu>
Subject   st: obtaining correct significance level for the endogenous variable in ivprobit with a potentially weak instrument
Date   Mon, 10 Mar 2008 00:09:26 +0200

Suppose that my model is

y1= ao + a1*y2 + a2*x1 (y1 - is a dichotomous variable)
y2=b0+b1*x1+b2*z1 (excluded instrument0

(one instrument, one endogenous regresssor).


1) Am i correct that if i have a reason to think that z1 is a weak instrument (for example, based on AR test in ivreg2) i must bootsrap in order to obtain the correct standard errors of a1?
If yes, does anybody know how should i do it.

2) Suppose that i want to depict the predicted probability as a function of x1 (when all other variables are at the mean) and i want to include the ci for this probability. Am i correct that if i think that z1 may be a weak instrument, i must use the boots option in prvalue? If yes, how do i do this after an ivprobit estimation? Can i do the following:
a) obtain the predicted probablity from the first stage (manually)
b) run the second stage probit estimation
c) run the prvalue commend with the boots option.

Thanks

Danny

----- Original Message ----- From: "Austin Nichols" <austinnichols@gmail.com>
To: <statalist@hsphsun2.harvard.edu>
Sent: Thursday, February 28, 2008 2:39 PM
Subject: Re: st: Critical values for stock and yogo test when the clusteroption is used



No--hence I said:
"
You will find discussion of constructing Anderson Rubin confidence
regions in http://www.stata.com/meeting/5nasug/wiv.pdf (and its refs).
"
rather than recommending -condivreg-.
Did you try augmenting excluded instruments as I suggested? Did you
do an overID test?

All of this advice was for the linear model, before you revealed you
have a probit; for your setting you may need original simulations.

On Thu, Feb 28, 2008 at 2:56 AM, Danny Cohen-Zada <danoran@bgu.ac.il> wrote:

As you recommended me i came to conclusion that my instruments are weak.
Therefore, i used condivreg to perform the conditinal likelihood ratio test.
According to this test the pvalue is 0.000. However, this procedure doesn't
have a cluster option. Is the conditional ratio test valid (when one have to
cluster the standard errors)?

Best,

Danny
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