Dear All,
The message I just sent (Endogenous right hand side variable) was cut in
two (the second part appearing under the heading [no subject]). Please
forgive me for trying again.
Reading this thread puzzles me. Rodrigo's suggestion appears to be
different from Mark's, although it seems to be meant as a clarification.
Rodrigo's solution is described in Wooldridge (2002, p. 574,
http://www.stata.com/bookstore/cspd.html).
I have a slightly different model:
y1 = a*x1 + b*y3 +e1
y2 = c*x2 + e2
y3 = max(0 , y2)
where y2 is potentially endogenous, and only observed when y2>0. y1, y3,
x1 and x2 are always observed.
My model differs from Rodrigo's (and Wooldridge's) model because y1 is
always observed, whereas, in Rodrigo's model, both y1 and y2 are
unobserved when y2<0. My model seems more in line with Kathleen's
original question.
I think I should:
1) estimate y2 by -tobit-
2) use fitted values of y2 to generate y3hat=max(0,y2hat)
3) use y3hat to estimate y1.
The problem is to obtain correct standard errors. Am I right to assume
Mark's suggestion will help me here? That is, use y3hat as an instrument
in step 3) as in
ivreg y1 (y3 = y3hat) x1
I would very much appreciate your advise, and, if possible, a reference.
Regards - Maarten
RE: st: Re: Endogenous right hand side variable
