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st: Simultaneous Equation Model


From   Danny Dan <danny2011dan@gmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   st: Simultaneous Equation Model
Date   Tue, 31 May 2011 08:40:39 -0500

Hello,

I am estimating a simultaneous equation probit model with two equations as
following:

Y1=a0+a1*Y2+a2*X1+e1
Y2=b0+b1*Y1+b2*X2+e2

where both Y1 and Y2 are binary. Y1 and Y2 are related and endogenous.
X1 and X2 are sets of exogenous variables and e1 and e2 error terms.
X1 and X2 may have some common variables but not all for the purpose
of identification.

There is a method described in Madalla (1983) (model 6, Ch#8,Page#
247) in order to estimate this type of models. But I do not know how
to compute the variance-covariance
matrix using the same. The formula for calculating variance and
covariance matrix uses PDF (Probability density function) and CDF
(Cumulative density function) but it is not mentioned how to calculate
those after the probit estimation.

My questions are:

(i) Is there any code in Stata which can help estimating this model
(like CDSIMEQ).
(ii) Can I use 'biprobit' in order to estimate this model?
(iii) Is there any other way to estimate this model?

Please help.

Thank you in advance.

Dan

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