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


From   kokootchke <kokootchke@hotmail.com>
To   statalist <statalist@hsphsun2.harvard.edu>
Subject   RE: st: Sample selection and endogeneity (or, combining heckman and ivreg)
Date   Thu, 6 Aug 2009 02:21:57 -0400

Shehzad wrote:
> To add to John's response, if your endogenous variable is binary, then I would use the following:
>
> probit y1 x1 x2 x3
> predict xbeta1, xb
> gen imills1=normd(xb)/normprob(xb) if y1==1
> replace imills1=-normd(xb)/(1-normprob(xb)) if y2==0
>
> heckman y2 y1 $yvar $zvar imills1 [pw=weight], sel(selection_probit= y1 $xvar imills1) cluster(commune) mills(imr2)
>
> I have assumed that the endogenous var is endogenous in both selection and outcome equation.

Dear Shehzad, 

If I understand correctly, you are assuming that y1 would be the endogenous variable, and so I guess x1 x2 and x3 are instruments for it?

My endogenous variable is not binary, it's a continuous variable. In this case, combining what you said and what John said, I would then use what John suggested: reg X Z (where X is the endogenous variable and Z is the instrument), predict X-hat... and then, instead of using X-hat directly in heckman model (like I believe John suggested), calculate the imr myself using these predicted values, and THEN use these predicted values in the heckman model... 

Am I understanding your approach correctly?

Also, what are the dollar signs? Do they refer to lists of variables?

Thanks.
Adrian



> Regards,
> Shehzad
>
>
> ----- Original Message ----
>> From: John Antonakis 
>> To: statalist@hsphsun2.harvard.edu
>> Sent: Wednesday, August 5, 2009 7:18:14 AM
>> Subject: Re: st: Sample selection and endogeneity (or, combining heckman and ivreg)
>>
>> Hi:
>>
>> One possibility is to manually obtain predicted values of the endogenous
>> variables (using regress), which will give you consistent estimates.
>> Then use the predicted values in the Heckman model and bootstrap the
>> standard errors.
>>
>> HTH,
>> John.
>>
>> ____________________________________________________
>>
>> Prof. John Antonakis
>> Associate Dean Faculty of Business and Economics
>> University of Lausanne
>> Internef #618
>> CH-1015 Lausanne-Dorigny
>> Switzerland
>>
>> Tel ++41 (0)21 692-3438
>> Fax ++41 (0)21 692-3305
>>
>> Faculty page:
>> http://www.hec.unil.ch/people/jantonakis&cl=en
>>
>> Personal page:
>> http://www.hec.unil.ch/jantonakis
>> ____________________________________________________
>>
>>
>>
>> On 05.08.2009 04:51, kokootchke wrote:
>>> 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.
>>>
>>> Thanks!
>>> Adrian
>>>
>>>
>>> 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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