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st: Simulating Instrumental Variable Probit Model


From   Sachin Chintawar <schint1@tigers.lsu.edu>
To   statalist@hsphsun2.harvard.edu
Subject   st: Simulating Instrumental Variable Probit Model
Date   Mon, 20 Apr 2009 15:40:38 -0600

Dear Statalist Users
I was trying to simulate a probit model with endogenous regressor and
increase the number of instruements to see how bias occurs due to
increased instruements. Following Dr. Maartin's example and the
Microeconometrics using Stata book I have created the following
program (which ofcourse I am not satisfied due to glaring mistakes). I
would greatly appreciate if you could give me some pointers and inputs
that could help me fix it.
----------------------------Start
Example---------------------------------------------------------------------------------------
global numobs 500             // sample size N
global numsims "1000"         // number of simulations
set seed 123456789

capture program drop endoprob

program endoprob, rclass
	version 10.1
	drop _all
set obs $numobs
    generate u = rnormal(0)
    generate mu = rnormal(0)
    generate x1 = rnormal(0)
    generate z1 = rnormal(0) 			  // 4 Instruements
    generate z2 = rnormal(0)
    generate z3 = rnormal(0)
    generate z4 = rnormal(0)
    generate a = 0.5*u
    generate x2 = z1 + z2 + z3 + z4 + a

    regress x2 =  z1 z2 z3 z4 mu                // endogenous
regressor with four instruments

                  					//capture x2hat

    generate y = 0.5 + 2*x1 + x2hat + mu + u    //Reduced Form Equation
    ivprobit y x1 x2hat

								//Capture the betas and SD's

end
------------------------------------End
Example----------------------------------------------------------------------------------
1. Well my first question is quite obvious how do I tell stata that my
y is a probit
2. How do I capture xhat2 so I can get my ivprobit to work?
3. From the MUS book I understood that _b captures the scalar beta
value but how can we capture the two parameters x1 and x2hat?

I would greatly appreciate your help in this regard
Sincerely
Sachin
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