Thursday, March 16, 2006

Re: st: IV with oprobit / mprobit?

With a categorical nominal (i.e. not ordered) endog var that takes on 3 (or n) values, you will have to convert it into two (or n-1) indicator variables (e.g. by by typing -tab xvar, gen(d)- and -drop d1-). Now you have 2 endog variables, d2 and d3, and you will need at least two excluded instruments for your estimating eq to be identified. Assuming you satisfy that minimal rank condition, you should use -ivreg2- for a start (see -findit ivreg2-) so you can get some first-stage diagnostics, even if the LPM first stage strikes you as a bit funny. If n were 2, you could use -treatreg- instead. But -ivreg2- is always a good place to start.

On 3/16/06, Bart Vanneste <> wrote: > Thanks very much for the useful reactions! > > I should have been more precise. I have a continuous > dependent variable and a discrete endogenous regressor > (with 3 categories): > y_cont = x_discrete + e > > Could I also extend Rivers and Vuong (1988) when the x > is categorical (i.e. not ordered), comparable to a > multinomial probit?

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