If both are binary, then I believe that biprobit is the way to go. See Greene for an excellent discussion -- he clearly states that doing the estimation jointly via bivariate probit 'solves' the endogeneity problem. ivprobit is best when the endogenous regressor is continuous. I actually learned this from this list earlier this fall.
Hope this helps.
Karen
-----Original Message-----
From: [email protected]
[mailto:[email protected]]On Behalf Of Mark Schaffer
Sent: Thursday, December 09, 2004 6:11 AM
To: [email protected]
Subject: Re: st: IV est. /w binary endogenous and binary dependent var
I had a look at biprobit, too. The syntax seems compatible with what
Guido wants to do, e.g.,
biprobit (y = w x1-xn) (w = z x1-xn)
but it wasn't clear to me from a quick perusal of the manual entry
that biprobit will properly handle the fact that the w that appears
in the first eqn is the dependent variable in the second. The help
file refers to this as a "Seemingly unrelated bivariate probit
model", which makes me think that it won't do what Guido wants.
Any biprobit experts out there who can clarify this?
--Mark
Date sent: Thu, 09 Dec 2004 12:07:42 +0100
From: jean ries <[email protected]>
To: [email protected]
Subject: Re: st: IV est. /w binary endogenous and binary dependent var
Send reply to: [email protected]
> Guido,
>
> You should use -biprobit-. I think that -ivprob- is intended to be
> used with a continuous endogenous regressor (please correct me if I am
> wrong). A look at Wooldridge (2002), may be useful (section 15.7.3).
> What he is suggesting looks like -biprobit- to me.
>
> Reference:
> Jeffrey M. Wooldridge, Econometric Analysis of Cross Section and Panel
> Data, MIT Press, 2002.
>
> jean
>
> Guido Heineck wrote:
>
> > I would appreciate if someone could give me a hint on the following
> > problem: I have a binary dependent variable, a set of covariates
> > plus a binary endogenous regressor for which I have an instrument.
> >
> > Adapting a suggestion for a somewhat similar problem
> > (http://www.stata.com/statalist/archive/2004-09/msg00339.html),
> > would anyone please advise me whether the following would be
> > correct:
> >
> > probit w x1-xn z
> > predict ghat
> > ivprob y , endog(w) iv(ghat) exog(x1-xn)
> >
> > where:
> > y ==> binary outcome
> > x1-xn ==> exogenous variables
> > w ==> endogenous binary variable
> > z ==> instrument
>
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Prof. Mark E. Schaffer
Director
Centre for Economic Reform and Transformation
Department of Economics
School of Management & Languages
Heriot-Watt University, Edinburgh EH14 4AS UK
44-131-451-3494 direct
44-131-451-3296 fax
44-131-451-3485 CERT administrator
http://www.sml.hw.ac.uk/cert
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