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From |
margherita Comola <margherita.comola@gmail.com> |

To |
statalist <statalist@hsphsun2.harvard.edu> |

Subject |
st: conceptual doubt about IV regressions: I have to exclude some exogenous regressors from first-stage! |

Date |
Mon, 8 Feb 2010 16:37:31 +0100 |

Dear Statalisters, I have a conceptual doubt about IV regressions. My problem is a bit more complicate (i.e. I have a multinomial selection rule) but I'll try to make the example simple. I am in the framework of the Heckman selection model: I have information on a population where only some individuals work, and two equations (binomial selection and wage equation). I have a group of regressors (X) that are common to both selection and wage equation, and "years of education" is one of them. Then I impose exclusion restrictions, so that I have some regressors specific to the selection equation (Z_1). Finally I have some regressors (Z_2) specific to the wage equation only: in particular the sector of activity of the respondent. So now the problem comes as "years of education" is endogenous in both equations. Since I have good instruments for that I use an IV strategy, and I write down my model as a system of three equations (selection, wage, "years of education") using the command cmp. That is, "years of education" is the dependent variable in one of the equations, and appears as a regressors in the other two equations. Which regressors should I include in the equation for "years of education", apart from the common variables (X) and the instruments? My intuition would suggest to put both Z_1 and Z_2 (all the other variables in the system) but I cannot put Z_2, as the sector of activity is by construction not available for those who are out of the labour market. How can I address the problem?? can I run the "years of education" equation with Z_1 but without Z_2? if not, what would you reccomend? Thanks alot for your help, any little hint will be appreciated Margherita -- Margherita Comola Paris School of Economics Email: comola@pse.ens.fr http://www.pse.ens.fr/comola/index.html * * For searches and help try: * http://www.stata.com/help.cgi?search * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/

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