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Re: st: Newey's Two-Step Estimator & ivprobit postestimation

From   "Brian P. Poi" <>
Subject   Re: st: Newey's Two-Step Estimator & ivprobit postestimation
Date   Fri, 16 Jun 2006 10:48:36 -0500 (CDT)

On Fri, 16 Jun 2006, Talip Kilic wrote:


I am estimating an ivprobit model, in which I am instrumenting for two
endogenous regressors. As suspected and stated in the STATA manual, MLE,
the default option, does not lead to convergence and iterations never
end if one wants to instrument for more than one endogenous regressor in
the ivprobit model. Once the Newey's two-step estimator option is
specified, the ivprobit model with multiple endogenous regressors is fit
unproblematically. However, ivprobit postestimation tools are also not
available under the two-step option. In this respect, I am wondering
whether any one has had any experience with postestimation under
ivprobit two-step option and if so, would you be able to provide any
hints, suggestions or resources that would lead me to estimate marginal
effects in my case? Any guidance would be appreciated. Thank you.



The fundamental issue is that the two-step estimator only estimates the parameters of the probit equation up to a scalar multiple of their population values. We can still test whether the two-step estimate of the coefficient on the endogenous regresssor is significantly different from zero, but we cannot use the estimates for postestimation analyses such as calculating marginal effects with the -mfx- command.

All is not lost, however. Wooldridge (2002, p. 475) does mention two ways that average partial (ie. marginal) effects can be obtained from the two-step estimator.

Hope this helps

-- Brian Poi


Wooldridge, J. M. (2002). Econometric Analysis of Cross Section and
Panel Data. Cambridge, MA: MIT Press.
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