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st: Explanation of endogenous binary IV using "biprobit"


From   "Sun, Yan (IFPRI)" <Y.SUN@CGIAR.ORG>
To   <statalist@hsphsun2.harvard.edu>
Subject   st: Explanation of endogenous binary IV using "biprobit"
Date   Mon, 3 Aug 2009 11:45:01 -0400

Hi, 

I have the following equations
Y1=Y2 X1 X2 X3 (1)
Y2=X1 X4 X5    (2)

Where Y1 is binary dependent variable and Y2 is binary endogenous
variable, Xs are exogenous variables.

When I run Probit model of equation (1), Y2 is positive significant; but
when I run equations (1) and (2) together using biprobit, Y2 is not
significant at all (in the 2nd stage), under the wald test of rho: chi2
is very small (with prob very big), which implying rho is not
significant and equation (1) and equation (2) is not correlated,
although X4 and X5 are significant. What does it mean? Does it mean that
Y2 is not endogenous variable and I could use probit model for equation
(1)? Does it also mean that Y2 has a significant impact for Y1?

Thank you very much.

Yan 

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