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Re: st: iv probit and endogenous binary variables

From   Nishant Dass <[email protected]>
To   [email protected]
Subject   Re: st: iv probit and endogenous binary variables
Date   Wed, 13 Sep 2006 23:56:36 -0700 (PDT)

Dear list-members,

I would like to add another question following Song Gao's

What should one do if one also has an interaction term with
this endogenous binary variable on the RHS?  (I realise
this  has little to do with Stata and is simply an
econometrics question, so please excuse me for that.) 
Thank you very much.



--- SONG GAO <[email protected]> wrote:

> 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!
> Song
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