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st: iv probit and endogenous binary variables

From   "SONG GAO" <[email protected]>
To   [email protected]
Subject   st: iv probit and endogenous binary variables
Date   Wed, 13 Sep 2006 15:50:29 -0400

Dear Statalisters,

I understand that in a two step IVPROBIT, the first stage is OLS estimation.

While my question is that I have binary endogenous variables in rhs
which includes 3 choices. In order to fit ivprobit estimation, may I
do the following regression?

 1. In the first stage, run 3 linear probability regressions on the 3 choices;
 2. Get the preditted probabilities of each of the choices;
 3. Take the predictted probabilities as instruments in second stage
ivprobit estimation.

The above is my first question, my second question is that when I do
IVREG and IVPROBIT, after I get the predictted values in the first
stage, I found that people use two stata commands for second stage, if
the predictted value is "zhat", the two commands in second stage are
as followings:

 a. ivreg y x (z=zhat)
 b. reg y x zhat

Am I right or wrong about this? I personally believe that "a" is right.

My thrid question is that if I have multiple endogenous regressors
(both are binary varibles), I know this is very diffficult to solve,
can I do it in the following way: Generate interaction terms of the
two endogenous binary variables, thus, I have a series of dummies and
take care of them following the traditional two step method.

BTW, I am using STATA 9 SE.

Thank you very much!

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