vipul bhatt <[email protected]> :
None of the above (or below, in this case). Use the predicted value
from your -probit- as an excluded instrument in -ivreg2- (on SSC) and
read the help file for -ivreg2- for tests of identification and overid
tests. The part you can ignore is that your excluded instrument is
generated, which is like the zeroth stage (with the first and second
stages being done by -ivreg2- is a single step)--Wooldridge does not
say you can ignore the first stage. See also
http://www.stata-journal.com/article.html?article=st0136
or slide 55 out of 95 in
http://www.stata.com/meeting/germany09/nichols.pdf
or e.g.
http://www.stata.com/statalist/archive/2007-04/msg00415.html
On Thu, Jan 7, 2010 at 8:52 AM, vipul bhatt <[email protected]> wrote:
<snip>
My question relates to the validity of the instrument Z. To argue for
the validity of this instrument should I consider Z's statistical
significance in the Probit model of Step 1?
>
> Or
>
> since step 1 is simply an extra step to obtain fitted probabilities to be used as instruments , we should only look at the statistical significance of the fitted values (X1_hat1) in the first stage of 2sls estimation in Step 2, i.e. whether or not b1=0 ?
>
> Wooldrige claims that we can ignore the step 1 estimation properties and focus only on step 2. However he does not offer any explanation for the same. I will really appreciate any comments or suggestions you may have on this issue.
>
> Thanks,
>
> VB
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