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st: Sample selection and endogeneity (or, combining heckman and ivreg)

From   kokootchke <>
To   statalist <>
Subject   st: Sample selection and endogeneity (or, combining heckman and ivreg)
Date   Tue, 4 Aug 2009 22:51:31 -0400

Dear all, 

I am trying to estimate an equation in which the dependent variable is only observed when a selection rule applies (your typical sample selection problem a la Heckman). One of the independent variables in the main equation is endogenous, and I'd like to use instrumental variables to address that issue within the Heckman framework.

I haven't been able to find any papers or references that deal with this issue, especially because I have a panel dataset containing 40+ countries and about 60 time periods (quarters). My approach is to run the selection probit, then use the predicted values in a 2SLS framework. I guess I'd have to do some standard-error correction (any hints on this would also be useful)... but I wanted to ask if you guys could tell me whether there is a Stata command that does this or if there are any references you could suggest?

For more information on my particular case, please see below.


p.s. A few more details on my model:

I want to estimate the effects of GDP growth and other macroeconomic variables on bond spreads, so my dependent variable in the main equation is the yield spread of a bond. The problem is that these spreads are primary market spreads or "spreads at launch", which means they are only observed at the moment a country places a bond in the market. 

My panel data are organized at a quarterly frequency. Whether a country issues one or multiple bonds in a given quarter is irrelevant as I basically take a weighted average of all spreads issued in a given quarter and use that as my dependent variable.

However, there are quarters when a country may not issue a bond... and this is the selection problem I'm trying to get at using a Heckman model.

On top of this, if we believe that the spreads are somehow related to the level of interest rates in the country, then macroeconomic variables such as GDP growth are going to be endogenous. I have one (potentially two) instrumental variable I want to use, and this is why I want to do the 2SLS...

Do you guys have any other suggestions besides what I suggested above?

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