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From |
Ricardo Henriquez <rhenriquez@sii.cl> |

To |
statalist@hsphsun2.harvard.edu |

Subject |
RE: st: testing endogeneity in a two-equation model with censored andbinary dependent variables. |

Date |
Wed, 09 Jul 2003 12:01:16 -0400 |

Many thanks. I think you are right. Ricardo Henríquez Chile -----Mensaje original----- De: owner-statalist@hsphsun2.harvard.edu [mailto:owner-statalist@hsphsun2.harvard.edu]En nombre de Mark Schaffer Enviado el: Miércoles, 09 de Julio de 2003 11:50 Para: statalist@hsphsun2.harvard.edu Asunto: RE: st: testing endogeneity in a two-equation model with censored and binary dependent variables. Ricardo, Date sent: Wed, 09 Jul 2003 11:30:11 -0400 From: Ricardo Henriquez <rhenriquez@sii.cl> Subject: RE: st: testing endogeneity in a two-equation model with censored and binary dependent variables. To: statalist@hsphsun2.harvard.edu Send reply to: statalist@hsphsun2.harvard.edu > Prof. Schaffer: > > 1. Thanks for your suggestions. > > 2 With respect to your comment: "This last statement confuses me. The > standard DWH test of endogeneity is used when estimating a single equation > using instrumental variables. The endogeneity relates to one or more > regressors in this single equation. These regressors can be binary -it > doesn't matter for either the IV estimation or the DWH test." > > Ronna Cong, from Stata Corporation, wrote an excelent response to the > questions: "How to test endogeneity?", "How do I perform a > Durbin-Wu-Hausman test?" (see the FAQs under endogeneity). > In her response she uses as an example a simultaneous two-equation model and > utilises regression analysis (regress), indicating, indirectly, that the two > dependent variables are continuous. However, you cannot use the procedure > suggested by Ronna Cong when one of the the dependent variables (in my case > the endogenous)is binary. In other words, it seems to me that does matter > what type of variables your are considering. Am I wrong?...... Yes and no, or not necessarily. :) If you want to do a test of endogeneity in the context of estimating the *entire system* of equations, then you are right. In other words, one option is to an endogeneity test in the context of estimating your 2-equation system. Since you would be explicitly estimating not only your Y1 equation but also your Y2 equation, and Y2 is a binary variable, you would need to get the functional form for Y2 right. On the other hand, you can do a test of endogeneity in the context of a *single-equation estimation*. In your case, you could explicitly estimate only the Y1 equation using, say, -ivtobit-. Since you're not estimating the Y2 equation, you don't have to worry about whether or not you get the functional form for Y2 right. --Mark > > Regards, > > > Ricardo Henríquez > Chile > > > > -----Mensaje original----- > De: owner-statalist@hsphsun2.harvard.edu > [mailto:owner-statalist@hsphsun2.harvard.edu]En nombre de Mark Schaffer > Enviado el: Miércoles, 09 de Julio de 2003 9:29 > Para: statalist@hsphsun2.harvard.edu > Asunto: Re: st: testing endogeneity in a two-equation model with > censored and binary dependent variables. > > > Ricardo, > > > Dear Statalist readers, > > > > I am estimating the following two-equation model using a two-stage > procedure > > suggested by Maddala (1983): > > > > Y1 = a1X1 + B1Y2 + e1 > > > > Y2*= a2X2 + e2 > > > > where Y2=1 if Y2*>0 > > Y2=0 otherwise > > > > Y1 is censored at zero and Y2 is binary (the realised value of the latent > > variable > > Y2*). Since Y2 is assumed to be endogenous, I would like to test the > > endogeneity of Y2. I checked the Durbin-Wu-Hausman test but it is not > > appropriate when one of the dependent variable is binary. > > This last statement confuses me. The standard DWH test of > endogeneity is used when estimating a single equation using > instrumental variables. The endogeneity relates to one or more > regressors in this single equation. These regressors can be binary - > it doesn't matter for either the IV estimation or the DWH test. > > If I understand correctly, you can't use the DWH test for a different > reason - Y1 is censored and you can't us straightforward IV to > estimate the Y1 equation. > > Would the following work? > > 1. Estimate the Y1 equation using Joe Harkness' -ivtobit-, i.e., > treat Y2 as endogenous. This is your efficient but possibly > inconsistent estimator. > > 2. Estimate the Y1 equation using -tobit-, i.e., treat Y2 as > exogenous. This is your inefficient but consistent estimator. > > 3. Use -hausman- to perform a Hausman test. It should be distributed > as chi-squared with 1 degree of freedom (because you are testing 1 > variable for endogeneity). The output of -hausman- may suggest that > there are 2 degrees of freedom (because -hausman- tries to be clever > in working out the df and occasionally doesn't get it right), but > df=1. > > Comments, anybody? > > --Mark > > > Thus, does anyone > > know if there is an alternative way to test for endogeniety in such a > > models. > > > > Any help will be much appreciated. > > > > > > Ricardo Henríquez > > Chile > > > > * > > * For searches and help try: > > * http://www.stata.com/support/faqs/res/findit.html > > * http://www.stata.com/support/statalist/faq > > * http://www.ats.ucla.edu/stat/stata/ > > > Prof. Mark E. Schaffer > Director > Centre for Economic Reform and Transformation > Department of Economics > School of Management & Languages > Heriot-Watt University, Edinburgh EH14 4AS UK > 44-131-451-3494 direct > 44-131-451-3008 fax > 44-131-451-3485 CERT administrator > http://www.som.hw.ac.uk/cert > > * > * For searches and help try: > * http://www.stata.com/support/faqs/res/findit.html > * http://www.stata.com/support/statalist/faq > * http://www.ats.ucla.edu/stat/stata/ > > * > * For searches and help try: > * http://www.stata.com/support/faqs/res/findit.html > * http://www.stata.com/support/statalist/faq > * http://www.ats.ucla.edu/stat/stata/ Prof. Mark E. Schaffer Director Centre for Economic Reform and Transformation Department of Economics School of Management & Languages Heriot-Watt University, Edinburgh EH14 4AS UK 44-131-451-3494 direct 44-131-451-3008 fax 44-131-451-3485 CERT administrator http://www.som.hw.ac.uk/cert * * For searches and help try: * http://www.stata.com/support/faqs/res/findit.html * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/ * * For searches and help try: * http://www.stata.com/support/faqs/res/findit.html * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

**References**:**RE: st: testing endogeneity in a two-equation model with censored and binary dependent variables.***From:*"Mark Schaffer" <M.E.Schaffer@hw.ac.uk>

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