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  • model with endogenous dichotomous predictor of continuous dependent variable

    Which Stata (v15.1) command should I use to estimate the following linear model:

    y = b0 + b1z + b2x

    where:

    y is continuous
    z is a dummy which is very likely endogenous
    x is a vector of control variables

    I would like to instrumentalize z with some other predictors. Since z is binary, I should not use ivregress 2sls, right? Then, which command should I use?

    I'd really appreciate any help. Thanks!

  • #2
    2sls is perfectly fine
    however if you want to model the endogenous variable as a probit, you could use etregress
    this command assumes an endogenous treatment effect, which is a binary variable.
    hth

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