To add to John's response, if your endogenous variable is binary, then I would use the following:
probit y1 x1 x2 x3
predict xbeta1, xb
gen imills1=normd(xb)/normprob(xb) if y1==1
replace imills1=-normd(xb)/(1-normprob(xb)) if y2==0
heckman y2 y1 $yvar $zvar imills1 [pw=weight], sel(selection_probit= y1 $xvar imills1) cluster(commune) mills(imr2)
I have assumed that the endogenous var is endogenous in both selection and outcome equation.
Regards,
Shehzad
----- Original Message ----
> From: John Antonakis <[email protected]>
> To: [email protected]
> Sent: Wednesday, August 5, 2009 7:18:14 AM
> Subject: Re: st: Sample selection and endogeneity (or, combining heckman and ivreg)
>
> Hi:
>
> One possibility is to manually obtain predicted values of the endogenous
> variables (using regress), which will give you consistent estimates.
> Then use the predicted values in the Heckman model and bootstrap the
> standard errors.
>
> HTH,
> John.
>
> ____________________________________________________
>
> Prof. John Antonakis
> Associate Dean Faculty of Business and Economics
> University of Lausanne
> Internef #618
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>
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> ____________________________________________________
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>
>
> On 05.08.2009 04:51, kokootchke wrote:
> > Dear all,
> >
> > I am trying to estimate an equation in which the dependent variable is only
> observed when a selection rule applies (your typical sample selection problem a
> la Heckman). One of the independent variables in the main equation is
> endogenous, and I'd like to use instrumental variables to address that issue
> within the Heckman framework.
> >
> > I haven't been able to find any papers or references that deal with this
> issue, especially because I have a panel dataset containing 40+ countries and
> about 60 time periods (quarters). My approach is to run the selection probit,
> then use the predicted values in a 2SLS framework. I guess I'd have to do some
> standard-error correction (any hints on this would also be useful)... but I
> wanted to ask if you guys could tell me whether there is a Stata command that
> does this or if there are any references you could suggest?
> >
> > For more information on my particular case, please see below.
> >
> > Thanks!
> > Adrian
> >
> >
> > p.s. A few more details on my model:
> >
> > I want to estimate the effects of GDP growth and other macroeconomic variables
> on bond spreads, so my dependent variable in the main equation is the yield
> spread of a bond. The problem is that these spreads are primary market spreads
> or "spreads at launch", which means they are only observed at the moment a
> country places a bond in the market.
> >
> > My panel data are organized at a quarterly frequency. Whether a country issues
> one or multiple bonds in a given quarter is irrelevant as I basically take a
> weighted average of all spreads issued in a given quarter and use that as my
> dependent variable.
> >
> > However, there are quarters when a country may not issue a bond... and this is
> the selection problem I'm trying to get at using a Heckman model.
> >
> > On top of this, if we believe that the spreads are somehow related to the
> level of interest rates in the country, then macroeconomic variables such as GDP
> growth are going to be endogenous. I have one (potentially two) instrumental
> variable I want to use, and this is why I want to do the 2SLS...
> >
> > Do you guys have any other suggestions besides what I suggested above?
> >
> > _________________________________________________________________
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