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From |
jean ries <[email protected]> |

To |
[email protected] |

Subject |
Re: st: 2SLS with Probit in the first-stage regression |

Date |
Mon, 13 Sep 2004 15:23:54 +0200 |

Jake,

Have a look at Wooldridge (2002), pages 623-625. He discusses the situation you are facing. He suggests the following procedure:

. probit w x1-xn z

. predict ghat

. ivreg y x1-xn (w = ghat)

where:

y ==> outcome

x1-xn ==> exogenous variables

w ==> endogenous binary variable

z ==> instrument

Wooldridge shows that in this procedure the 2SLS standard errors remain valid. He also discusses the procedure you seem to have used:

. probit w x1-xn z

. predict ghat

. regress y x1-xn ghat

and points to the problems that arise by doing so.

Reference:

Jeffrey M. Wooldridge, Econometric Analysis of Cross Section and Panel Data, MIT Press, 2002.

best wishes,

jean

At 05:30 13/09/2004, you wrote:

Hi, I'd like to do a 2SLS estimation where the first-stage regression is Probit. For example, the model is y = a + b1X1 + b2X2 + u where X1 is an endogenous binary variable. I'd like to instrument X1 with Z1 and Z2 where the first-stage regression is a Probit X1 = a + b1Z1 + b2Z2 + b3X2 + e I tried to use ivreg but it seems the first-stage regression ivreg does is OLS rather than Probit. Although I can do the first-stage Probit regression manually and then use the predicted X1 in the second-stage regression, I don't think it is accurate since the OLS standard errors of the second-stage regression will be incorrect in such a case. Does Stata has a procedure that does 2SLS with Probit in the first-stage? Any suggestions would be greatly appreciated! Thanks, Jake

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**Follow-Ups**:**Re: st: 2SLS with Probit in the first-stage regression***From:*"Mark Schaffer" <[email protected]>

**References**:**st: 2SLS with Probit in the first-stage regression***From:*Jake Herb <[email protected]>

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