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st: re: Discrete endogenous variables in 2SLS?

From   Christopher Baum <>
Subject   st: re: Discrete endogenous variables in 2SLS?
Date   Wed, 29 Apr 2009 16:35:30 -0400

Jeffrey said
Can XTIVREG be used in the case of discrete endogenous variables in some way? I have a problem such as: Y = f(a,b,c) a = f(z,b,c) where 'a' is a dichotomy. For 'z' to be an instrument for 'a' then there is a co-linearity problem.
If the command
xtivreg y (a=z) b c, fe
has a collinearity problem, it indicates that there is something wrong with the set (z b c iota) as instruments. That sounds to me like a case of 'perfect prediction'. What happens if you try to estimate the dichotomous equation
probit a z b c
does that complain of 'perfect prediction'? If that is the case then your main equation is not identified.

Kit Baum   |   Boston College Economics and DIW Berlin   |
An Introduction to Stata Programming   |
An Introduction to Modern Econometrics Using Stata   |

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