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st: how to combine Murphy-Topel correction with Newey-West correction???


From   margherita Comola <margherita.comola@gmail.com>
To   statalist <statalist@hsphsun2.harvard.edu>
Subject   st: how to combine Murphy-Topel correction with Newey-West correction???
Date   Wed, 21 Oct 2009 18:09:15 +0200

Dear Statalist,

I am estimating an probit model where the observations are by
construction non-independent. In order to get the corrected standard
errors, I apply a version of the Newey and West (1987) robust
covariance matrix [specifically, the version proposed by Fafchamps and
Gubert (2007) in the context of dyadic observation: I correlate the
error of the observation ij with all the other observations which
include either i or j: ik, jk, ki, kj].

Aside, I also need to instrument a (continuous) regressor. For
practical convenience, I proceed with a two-step estimation adding to
the probit model the fitted values of the first step regression. This
boils down to a generated regressor problem, that I know it is usually
corrected with Murphy-Topel technique.

Now my question is the following:
How can I incorporate the Murphy-Topel (1985) correction into a Newey
and West type VCV matrix? are the two correction compatibles? how can
I do it, in practice?

Thanks alot,
Margherita



--
Margherita Comola
Paris School of Economics
Email: comola@pse.ens.fr
http://www.pse.ens.fr/comola/index.html
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