Stata: Data Analysis and Statistical Software

well, here it gets wobbly for me, too.

My econometric intuition tells me (that may be wrong): the main purpose of the first stage regression is to have an econometrically sound model that predicts values for the endogenous variable X, using a valid instrument Z.
It is not the purpose of the first stage to be economically sound, or to predict values of X that can be found in 'reality'.
In that sense, obtaining predicted values beyond 0 or 1 should not cause any problem.

But I am interested in knowing the opinion of the theorists in this list....

Justina


[email protected] schrieb: -----

An: [email protected]
Von: Javier Pérez <[email protected]>
Gesendet von: [email protected]
Datum: 08.02.2011 11:06AM
Thema: Re: st: xtivreg2 with endogenous binary regressors

Felipe, you are right, the problem is the same. The issue is that with
xtivreg2 you will always have a OLS first stage, even if your
endogenous regressor is binary. What Justina says is that it is no a
problem for the resons she pointed out. You can always try to do it
manually estimating the probit and put the predicted values back in
the main equation but, as you say, the correction of the SE is the
issue, especially if you have a panel data.

Anyway, if I understood correctly from Justina, getting the OLS first
sate estimators would not be a problem in this case, but I am not sure
to have understood the reason. Could you please Justina tell me a
little more about that. The thing is that xtivreg2 uses the predicted
values of the endogenous regressor X (binary), but estimating it by
OLS there is no guarantee that the predicted value will be between 0
and 1. Many thanks.


2011/2/8 Filipe Silva <[email protected]>:
> Hi,
>
> Please correct me if wrong:
> I am having a similar issue. However I'm using the fitted values from
> a first step nl regression and using them as instrument for the
> endogenous in the second step (see textbook Cameron & Trivedi, 2005
> pp. 193). The problem is the correction of se in the second step.
> Either you cumpute the V correction manually (not sure if there is an
> appropriate package?) or use bootstrap.
>
> My question:
> Could this also apply to the case of an ordinal endogenous variable,
> since what is used is a linear projection?
>
> Many thanks,
>
> Filipe
>
>
> 2011/2/8 Justina Fischer <[email protected]>:
>
>
>> Hi
>>
>> you can use ivreg2 in that case.
>>
>> reason: you are only interested in predicting computationally correct values
>> of the endogenous X, but not in getting the 'right' coefficients on Z.
>> In a sense, the size of Z is of no interest to you; only its predictive
>> power matters.
>>
>> Hope this helps
>>
>> Justina
>>
>>
>>
>>
>> [email protected] schrieb: -----
>>
>> An: [email protected]
>> Von: Javier Pérez <[email protected]>
>> Gesendet von: [email protected]
>> Datum: 08.02.2011 10:23AM
>> Thema: st: xtivreg2 with endogenous binary regressors
>>
>> I was wondering if anybody could please help me with the following
>> issue: in my model I want to use the xtivreg2 Stata command, but in my
>> case both the endogenous regressor and the instrument are binary; but
>> the first stage with the xtivreg2 gives me only OLS estimators,
>> instead of a logit or probit ones. Could you please give me any light
>> about the potential solution? I saw one author with a similar
>> situation just using the OLS first stage in this case, so the question
>> could then become how can I justify using an OLS fisrt stage rather
>> than logit or probit with the binary dep var.
>>
>> Many thanks in advance. Javier
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>>
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