Dear statalist,
I am trying to use probit to get more efficient estimates while evading the forbidden regression using 2SLS. I have an original regression with an endogenous binary independent variable and continuous dependent variable (Y). I follow Adams et al. (2009) using a three-stage procedure https://www.sciencedirect.com/scienc...27539808000388, also mentioned in Wooldridge (2010):
1. Use probit to regress the endogenous variable on the instrument(s) and exogeneous variables
2. use the predicted values from the previous step in an OLS first-stage together with the exogenous (but without the instrumental) variables
3. Do the second stage as usual
My question is whether I correctly implement step 3 into STATA? Do I need to use ivregress here or is there a more suitable command?
I am trying to use probit to get more efficient estimates while evading the forbidden regression using 2SLS. I have an original regression with an endogenous binary independent variable and continuous dependent variable (Y). I follow Adams et al. (2009) using a three-stage procedure https://www.sciencedirect.com/scienc...27539808000388, also mentioned in Wooldridge (2010):
1. Use probit to regress the endogenous variable on the instrument(s) and exogeneous variables
Code:
probit X1 Xi-Xn Z i.year i.ffi, vce(robust), where X1 is the endogenous dummy, Xi-Xn are the exogenous variables and Z is the instrument
Code:
predict shat, pr
Code:
regress Y X1 Xi-Xn shat i.year i.ffi, robust
Code:
ivregress 2sls Y X1 Xi-Xn (X1 = shat), vce(robust) first
My question is whether I correctly implement step 3 into STATA? Do I need to use ivregress here or is there a more suitable command?
Comment