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st: two-stage dummy variable model


From   "Mareike" <MareikeHahr@aol.com>
To   <statalist@hsphsun2.harvard.edu>
Subject   st: two-stage dummy variable model
Date   Tue, 1 Jun 2010 19:19:42 +0200

Dear Statalist,

I'm running a fixed effect model on panel data. I assume that one of my
explanatory variables, a dummy variable taking the values 0 or 1, is
endogenously determined. Thus I was planning to apply an instrumental
variable technique in the form that I run a two-stage model: in the first
stage I run a logit model, including as dependent variable the variable that
was assumed to suffer from endogeneity in the original model and as
regressors the exogenous variables from he main equation. In a second stage,
the predicted probabilities from the logit should be interacted with the
observed dichotomous values of the (endogenous) dummy variable and therefore
used as the instrument in a two stage dummy-variable model. 
I got this idea from a paper from Heckman (1978) and think that it might
solve my specific problem very well. But when trying to realize this idea, I
really had problems of telling Stata what to do exactly. How can I tell
Stata to use the predicted values from the logit model, interact them with
the dichotomous values of the dummy variable and then to use these values
for the endogenous variable in the fixed effect regression???

I would be very thankful if anybody of you can think of a convenient way of
realizing this.

Thanks a lot in advance

Mareike

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