st: Re: 2SLS with probit in the first stage regression

[Kit Baum <baum@bc.edu>]

Please read the Baum-Schaffer-Stillman paper, SJ 2007 (preprint  
available from my website below) on this subject. You can estimate  
the equation with an endogenous dummy consistently with IV, and in  
our -ivreg2- you can use the endog() option to test whether that  
variable must be considered endogenous. You can use -xtivreg2- to  
perform a fixed effect model, as -xtivreg2- has the same options  
available as does -ivreg2- in terms of endogeneity tests.


Kit Baum, Boston College Economics and DIW Berlin
http://ideas.repec.org/e/pba1.html
An Introduction to Modern Econometrics Using Stata:
http://www.stata-press.com/books/imeus.html


On Feb 15, 2008, at 2:33 AM, Renuka wrote:


> 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.
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