The two-stage regression you describe is certainly not the right way
to go, and there are general problems with running a probit with fixed
effects in panels (search for "incidental parameters" on google.com,
and see e.g. http://www.msu.edu/~ec/faculty/wooldridge/current%20research/panel4r9.pdf),
much less with endogenous explanatory variables.
But it looks like you should be using survival analysis, anyway, where
the transition from the status of temporary to long-term employee
would be the "failure" modeled. See -help st- for more info.
On 3/3/06, Elena Giarda <[email protected]> wrote:
> I have a very large data-set of individual earnings, with a panel data
> structure, covering the period 1985-2004. I would like to estimate the
> probabilities of transition from the status of temporary to long-term
> employee.
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