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st: Probit Model with Instrumental variables


From   Sachin Chintawar <schint1@tigers.lsu.edu>
To   statalist@hsphsun2.harvard.edu
Subject   st: Probit Model with Instrumental variables
Date   Sun, 26 Apr 2009 17:42:21 -0600

Dear All
Well I did find why the results were contrary to the results published
by Buse. I did notice one thind that Martin help me do but cannot
figure out why and hope someone could help me
When I use the statement -generate y = 0.5 + 2*x1 + x2hat + mu + u>4-
the y generated is 1 or 0 with "4' from which on we want the dependent
to be 1. Unfortunately when I change the value from "4" to anything
above then it does not work giving an error message that
"May not drop an endogenous regressor".
This has left me puzzled and stumped. Any help would be greatly appreciated.
Thanks
Sachin
---------------------------------------Start
Example------------------------------------------------------;
global numobs 500             // sample size N
global numsims "500"         // 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 v = rnormal(0)
   //generate x = rnormal(0)
   generate z1 = rnormal(0)   // 4 Instruements
   generate z2 = rnormal(0)
   generate z3 = rnormal(0)
   generate z4 = rnormal(0)
   // Also be written *drawnorm u mu x1 z1 z2 z3 z4
   generate a = 0.4*u
	
   generate x = 0.5 + 0.1*z1 + a
   regress x  z1 // endogenous regressor with four instruments
   predict px

  generate y = 0.5 + px + mu + u > 4    //Reduced Form Equation
  ivprobit y (x= z1 )
  predict py
end
simulate _b _se y py , ///
   reps($numsims): endoprob

mean x* y*
--------------------------------------------------------End
Program-------------------------------------------------------------
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