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st: Murphy-Topel


From   Evans Jadotte <evans.jadotte@uab.es>
To   statalist@hsphsun2.harvard.edu
Subject   st: Murphy-Topel
Date   Thu, 24 Dec 2009 18:28:52 +0100

Dear listers,

I am estimating a model which involves three steps (or actually 2) and need to correct for the standard errors. I am thinking of the Murphy-Topel (M-T) correction but would like to know whether it makes sense and how to go about it in Stata:

Step 1) I estimate a count model (negative binomial)
M = aZ + e

The prediction of M is used as an instrument for R, a reduced form equation.

In steps 2 and 3) , I estimate an IV-Tobit

L = bR + gX + u (structural equation)
R = dY + e (reduced form equation)

Since the prediction of M is my instrument for R, there is a downward bias in the standard errors of the structural equation that a naïve variance would not account for. Can an M-T correction of the standard errors produced in the structural equation solve this problem and if yes how could I go about it in Stata? Your suggestions are highly appreciated.

Happy holidays!

Evans

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