Hi all,
I have a question concerning the use of ivprobit.
I'm modeling the adoption of certain agricultural technology on land at the
plot level. One of my regressor is a credit constrained dummy variable which
I suspect to be endogenous and I want to instrument.
1. if I use ivprobit, --> ivprobit Y X (D=Z)
It seems that the instrument equation is estimated with OLS--> which gives
me a predicted probability to adopt (2nd stage) ranking from -4.12 to 2.87,
I guess this is not good, the rest of the model however is fine...
2. As suggested in previous posts, I then use ivprobit and use the predicted
variable as an instrument:
1. probit D Z X
2. predict D*
3. ivprobit Y X (D=D*)
The results are quite different from the first regression and Wald test
rejects endogeneity.
3. One problem I suspect is that I'm running all at the plot level
(household have different number of plots) but my endogenous variable is a
household level variable as well as Z my instrument--> households with high
number of plots are overweighted... But there are plot specific variables in
X --> so for identification condition I need to include all X in the first
stage right? Or should I run the first regression at the household level and
include the predicted probability as a regressor?
Many thanks for your suggestions!
Camille
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