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Re: st: Combining ivregress and heckman


From   Austin Nichols <austinnichols@gmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: Combining ivregress and heckman
Date   Thu, 16 May 2013 15:17:44 -0400

Barbara Engels <engels.ba@gmail.com>:
I would suggest not using those variables as instruments, as they do
not satisfy the exclusion restrictions.  You need to find a natural
experiment of some kind.

On Thu, May 16, 2013 at 2:07 PM, Barbara Engels <engels.ba@gmail.com> wrote:
> Well, actually, yes, I am trying to instrument the share of employment time and the share of unemployment time with the year-to-year change (in Stata: d.) of these shares. Which transformation would you suggest - assuming there are no "better" instruments than transformations?
>
>
> On 16.05.2013, at 20:00, Austin Nichols wrote:
>
>> Barbara Engels <engels.ba@gmail.com>:
>> Sounds like no instruments at all. Are you saying you are
>> instrumenting for weeks unemployed and weeks employed for those who
>> worked at some point during the year with "year-to-year variation of"
>> weeks unemployed and weeks employed? Makes no sense to me.
>>
>>
>> On Thu, May 16, 2013 at 1:49 PM, Barbara Engels <engels.ba@gmail.com> wrote:
>>> my instruments are year-to-year variation of the endogenous variables, alongside  a handful of exogenous RHS variables from the original regression.
>>>
>>>
>>> On 16.05.2013, at 19:44, Austin Nichols wrote:
>>>
>>>> Barbara Engels <engels.ba@gmail.com>:
>>>> So you have a whole list of endogenous RHS variables? What are your instruments?
>>>>
>>>> On Wed, May 15, 2013 at 8:28 AM, Barbara Engels <engels.ba@gmail.com> wrote:
>>>>> it's a standard wage equation. the independent, presumably endogenous variables are employment status shares, i.e. for example the share of months that an individual worked full-time during a year, the share of months that it was unemployed etc. ... . Hence I have observations on x and xe for both observed and missing wages. My selection dummy is "labor force participation" which I define as being =1 if the hours worked are positive and =0 for zero hours worked. I assume that the employment status variables are correlated with the error term since I assume that they are correlated with unobserved individual (fixed) effects.
>>>>>
>>>>>
>>>>>
>>>>> On 15.05.2013, at 14:19, Austin Nichols wrote:
>>>>>
>>>>>> Barbara Engels <engels.ba@gmail.com>:
>>>>>>
>>>>>> Do you have observations on x and xe for the observed and missing y?
>>>>>> E.g. are you worried about selection into the labor market, and your
>>>>>> data has workers and nonworkers?  Can you specify what the selection
>>>>>> process is, and what the nature of the endogeneity in xe is?
>>>>>>
>>>>>>
>>>>>> On Wed, May 15, 2013 at 7:54 AM, Barbara Engels <engels.ba@gmail.com> wrote:
>>>>>>> Thanks for this comment. However, I am not sure I understood it correctly.
>>>>>>> Say that I want to estimate
>>>>>>>
>>>>>>> y x xe
>>>>>>>
>>>>>>> where y is the dependent, x and xe the independent variables, where xe are the independent variables presumed to be endogenous.
>>>>>>>
>>>>>>> The Heckman two--step is described by
>>>>>>>
>>>>>>> heckman y x xe (selection= x xe excl)
>>>>>>>
>>>>>>> where excl are the exclusion restrictions and selection is some binary selection variable.
>>>>>>>
>>>>>>> the IV would look something like
>>>>>>>
>>>>>>> ivregress 2sls y x (xe=instrumentals).
>>>>>>>
>>>>>>> Are you saying that I should use "instrumentals" instead of xe in the selection equation, then predict using predict select_xb, psel (=p_hat) and then just add psel to the instruments in ivregress, so that the latter becomes
>>>>>>>
>>>>>>> ivregress 2sls y x (xe=instrumentals p_hat)?
>>>>>>>
>>>>>>> I am not sure this is what you meant. thanks in advance?
>>>>>>>
>>>>>>>
>>>>>>> On 15.05.2013, at 13:33, Austin Nichols wrote:
>>>>>>>
>>>>>>>> Barbara Engels <engels.ba@gmail.com>:
>>>>>>>> There are some bad suggestions in that thread, IMHO.  You can use
>>>>>>>> -ivregress- or -ivreg2- (SSC) to correct for bias of several
>>>>>>>> varieties; excluded instruments used in the selection equation can be
>>>>>>>> used in a first stage probit, then predict to make a new generated
>>>>>>>> instrument to accompany your other excluded instruments.  I.e. use
>>>>>>>> predicted probability of y1, call it p_hat, as an instrument for y1 at
>>>>>>>> the same time you use z as an instrument for x.
>>>>>>>>
>>>>>>>> On Wed, May 15, 2013 at 5:33 AM, Barbara Engels <engels.ba@gmail.com> wrote:
>>>>>>>>> Dear Statalist users,
>>>>>>>>>
>>>>>>>>> I want to estimate a  model that accounts both for  sample selection like Heckman Two-Step, and endogeneity like ivregress.
>>>>>>>>> The dependent variable is continuous. The variables to be instrumented appear both in the normal regression and in the selection equation in the Heckman model.
>>>>>>>>> I found some hints on Statalist (http://www.stata.com/statalist/archive/2009-08/msg00219.html), but didn't quite understand how to perform the combined "ivheckman" after all.

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