Hi
I would like to find out if training which is one of
my RHS variable is an endogenous variable. The
original regression was a pay equation as follows:
.xtreg y training meanworkplacetraining x2 x3 x4
I used xtreg as the data are grouped across workplaces
and considered to be a less biased OLS estimator.
Training is a binary variable, dummy=1 if they have
had training and 0 otherwise and the data is
cross-section data. I left out the meanworkplace
training for now. I want to deal with one endogenous
variable at a time.
I did:
.probit training x2 x3 x4 z
where z = my instrument
I then did:
predict ghat
I then issued:
.ivreg pay x2 (training = ghat) x3 x4
Part of what I got is:
Number of obs = 14321
F( 58, 14262) = 115.93
Prob > F = 0.0000
R-squared = 0.3104
Adj R-squared = 0.3076
Root MSE = .49362
Coef. Std. Err. t P>|t|
-------------+----------------------------------------
training |.2904799 .116244 2.50 0.012
Can I take interpret that the training variable is not
endogenous? I would be grateful if anyone would tell
me if I have done it correctly to find out if my
training variable is endogenous and if it is
endogenous. If I have done it incorrectly what would
be the correct way to go about it.
Any suggestions would be greatly appreciated.
Thank you
Renuka
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