There are at least two approaches you can follow.
First, you can estimate the system using -treatreg-. That means you also
specificy a probit-type treatment equation for your endogenous dummy. -
treatreg- estimates the treatment equation and the outcome equation for y
as a system.
Second, if want to estimate only the outcome equation y, you can simply
use -ivreg- or -ivreg2-. Consistency of IV does not require the endogenous
variable(s) to be continuous; endogenous dummies are fine. The results
won't be as efficient as with the sytem estimation using -treatreg-, but
they will have the advantage (as usual with single-equation methods) of
being consistent under a broader range of assumptions than the system
estimation results.
Hope this helps.
--Mark
Quoting "S.Rahardja" <[email protected]>:
> Dear Colleagues,
>
> I wonder if you could give me tips on how should I
> deal with an endogenous dummy variable.
> What I'm thinking is to run using OLS, say:
> y = a + bX + dD + e
>
> where D= 0|1 is the endogenous dummy variable.
>
> Or, does this sound more like a selection problem
> (where I can split the sample into two) ?
>
> Thank's in advance.
>
>
>
>
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Prof. Mark Schaffer
Director, CERT
Department of Economics
School of Management & Languages
Heriot-Watt University, Edinburgh EH14 4AS
tel +44-131-451-3494 / fax +44-131-451-3008
email: [email protected]
web: http://www.sml.hw.ac.uk/ecomes
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